* The Wall Street Journal
* OCTOBER 30, 2009
By ALICIA MUNDY
WASHINGTON -- The House health-care bill presents more problems for drug makers than legislation in the Senate, but it gives the medical-device industry better breaks.
The variations in the bills underscore why health-care companies have been lobbying vigorously on Capitol Hill. Billions of dollars are at stake, depending on which version is adopted.
The Senate Finance Committee in October approved a bill that would place a $40 billion tax over 10 years on medical-device makers. That figure is halved to roughly $20 billion in the House version. Senate leaders are also preparing to reduce the tax to around that level, according to industry officials and congressional aides.
Comparing the Plans
Public Option
* House: Creates government-run health-insurance plan that would negotiate rates with doctors and hospitals.
* Senate: Same except states would have right to opt out.
* Winners/Losers: Doctors likely to get higher payments than they would if public plan rates were tied to Medicare. Insurers could lose because they'll face a new competitor.
Employer Mandate
* House: Employers must provide health-insurance coverage or pay fine of 8% of payroll (for those with payroll greater than $750,000).
* Senate: Penalty for employers who don't provide coverage is up to $750 per employee, if employees get government subsidies.
* Winners/Losers: Employers generally fare better under Senate plan.
Taxes
* House: Surtax of 5.4% on married couples earning more than $1 million a year or individuals making more than $500,000 a year.
* Senate: No surtax on the wealthy. Tax on certain high-value health-insurance plans.
* Winners/Losers: Unions prefer the House bill because some union members have high-value or "Cadillac" health plans.
Individual Mandate
* House: Those who go without insurance would pay fine of up to 2.5% of adjusted gross income.
* Senate: Finance Committee bill would levy fines of up to $1,500 per family if people refuse to purchase health insurance.
* Winners/Losers: Lower-income people get subsidies to buy coverage. Those who feel they still can't afford health insurance would lose, because they have to pay a fine.
Note: Senate consensus bill not yet released; some details may change.
Under the House bill, the 2.5% levy on device makers applies to revenue at the point of sale, though it excludes certain retail purchases. The Senate Finance version would tax device makers according to their share of the market and would go into effect three years sooner.
The drug industry took a big hit in the House bill. For elderly people who are eligible for both Medicare and Medicaid, the bill mandates rebates from the drug makers so that the Medicare system ends up paying less. Those rebates are estimated to cost the industry $60 billion over a decade.
The House bill, unlike the Senate version, also allows the federal government to negotiate Medicare drug prices directly with companies, a provision the industry has fought.
In June, the White House and Senate Finance Committee Chairman Max Baucus (D., Mont.) announced an agreement with the pharmaceutical industry under which the industry would make concessions worth $80 billion in savings to the government.
Several House Democratic leaders said they didn't feel bound by the deal. Their House bill could cost the drug industry $140 billion.
"The House bill practically doubles what pharma offered earlier," said analyst Eric Assaraf of Concept Capital's Washington Research Group.
Ken Johnson of the PhRMA, the industry's trade group, said the House bill causes "some concern." Mr. Johnson said the proposed rebates "could lead to catastrophic job losses and cuts to R&D."
He said drug makers are still "on board for health-care reform" and think a compromise will be reached. "Just because one scene in the play makes you want to bolt for the door, you don't tear up your theater tickets," Mr. Johnson said.
Makers of brand-name drugs scored one major victory in the House. The bill includes a provision creating a way for the Food and Drug Administration to approve generic versions of biologic drugs, complex and expensive medicines derived from proteins. But it gives brand-name-drug companies sales exclusivity for 12 years and allows them to extend it with minor tweaks to their formulas.
One device maker said the House bill is still too onerous and could lead to job losses. Invacare Corp., a leading maker of oxygen supply systems and other home medical equipment with sales last year of about $1.8 billion, said the tax will eat into profits and lead to lower research spending. "We wanted the tax to be tiered to give companies like ours a chance," said Chief Executive Mal Mixon. "They should have taxed profits, not revenues."
Supporters of the new taxes say that despite the cost, drug and device makers will make money on the health-care overhaul because more Americans will carry health insurance and be able to use products from the industries. However, Mr. Mixon says he doesn't expect to gain new customers because his products are mostly used by older patients already covered by Medicare.
* OCTOBER 30, 2009
By ALICIA MUNDY
WASHINGTON -- The House health-care bill presents more problems for drug makers than legislation in the Senate, but it gives the medical-device industry better breaks.
The variations in the bills underscore why health-care companies have been lobbying vigorously on Capitol Hill. Billions of dollars are at stake, depending on which version is adopted.
The Senate Finance Committee in October approved a bill that would place a $40 billion tax over 10 years on medical-device makers. That figure is halved to roughly $20 billion in the House version. Senate leaders are also preparing to reduce the tax to around that level, according to industry officials and congressional aides.
Comparing the Plans
Public Option
* House: Creates government-run health-insurance plan that would negotiate rates with doctors and hospitals.
* Senate: Same except states would have right to opt out.
* Winners/Losers: Doctors likely to get higher payments than they would if public plan rates were tied to Medicare. Insurers could lose because they'll face a new competitor.
Employer Mandate
* House: Employers must provide health-insurance coverage or pay fine of 8% of payroll (for those with payroll greater than $750,000).
* Senate: Penalty for employers who don't provide coverage is up to $750 per employee, if employees get government subsidies.
* Winners/Losers: Employers generally fare better under Senate plan.
Taxes
* House: Surtax of 5.4% on married couples earning more than $1 million a year or individuals making more than $500,000 a year.
* Senate: No surtax on the wealthy. Tax on certain high-value health-insurance plans.
* Winners/Losers: Unions prefer the House bill because some union members have high-value or "Cadillac" health plans.
Individual Mandate
* House: Those who go without insurance would pay fine of up to 2.5% of adjusted gross income.
* Senate: Finance Committee bill would levy fines of up to $1,500 per family if people refuse to purchase health insurance.
* Winners/Losers: Lower-income people get subsidies to buy coverage. Those who feel they still can't afford health insurance would lose, because they have to pay a fine.
Note: Senate consensus bill not yet released; some details may change.
Under the House bill, the 2.5% levy on device makers applies to revenue at the point of sale, though it excludes certain retail purchases. The Senate Finance version would tax device makers according to their share of the market and would go into effect three years sooner.
The drug industry took a big hit in the House bill. For elderly people who are eligible for both Medicare and Medicaid, the bill mandates rebates from the drug makers so that the Medicare system ends up paying less. Those rebates are estimated to cost the industry $60 billion over a decade.
The House bill, unlike the Senate version, also allows the federal government to negotiate Medicare drug prices directly with companies, a provision the industry has fought.
In June, the White House and Senate Finance Committee Chairman Max Baucus (D., Mont.) announced an agreement with the pharmaceutical industry under which the industry would make concessions worth $80 billion in savings to the government.
Several House Democratic leaders said they didn't feel bound by the deal. Their House bill could cost the drug industry $140 billion.
"The House bill practically doubles what pharma offered earlier," said analyst Eric Assaraf of Concept Capital's Washington Research Group.
Ken Johnson of the PhRMA, the industry's trade group, said the House bill causes "some concern." Mr. Johnson said the proposed rebates "could lead to catastrophic job losses and cuts to R&D."
He said drug makers are still "on board for health-care reform" and think a compromise will be reached. "Just because one scene in the play makes you want to bolt for the door, you don't tear up your theater tickets," Mr. Johnson said.
Makers of brand-name drugs scored one major victory in the House. The bill includes a provision creating a way for the Food and Drug Administration to approve generic versions of biologic drugs, complex and expensive medicines derived from proteins. But it gives brand-name-drug companies sales exclusivity for 12 years and allows them to extend it with minor tweaks to their formulas.
One device maker said the House bill is still too onerous and could lead to job losses. Invacare Corp., a leading maker of oxygen supply systems and other home medical equipment with sales last year of about $1.8 billion, said the tax will eat into profits and lead to lower research spending. "We wanted the tax to be tiered to give companies like ours a chance," said Chief Executive Mal Mixon. "They should have taxed profits, not revenues."
Supporters of the new taxes say that despite the cost, drug and device makers will make money on the health-care overhaul because more Americans will carry health insurance and be able to use products from the industries. However, Mr. Mixon says he doesn't expect to gain new customers because his products are mostly used by older patients already covered by Medicare.