President Obama signed into law the Patient Protection and Affordable Care Act (ACA) on March 23, 2010. This landmark legislation marks the greatest change in the provision of health care in the US in over half a decade and it will allow insurance coverage for the first time to millions of low-income Americans.

Biotech, pharma, medical device, health IT and insurance companies are all watching carefully to see what the future implications will be to their operations in the world’s largest market.  Some have already slashed earnings estimates (Abbott, Johnson & Johnson, Eli Lilly, Gilead) due to the requirement to offer higher price rebates for government-funded health plans under the Act.

We have seen the passionate grassroots campaigns on both sides of the issue over the past year and have heard many dire warnings that the US economy simply cannot tolerate the additional costs (the US is already spending 17% of its GDP on health care).

Jonathon Gruber PhD from the MIT Department of Economics has published an overview of both the issues and benefits of ACA in a health care reform feature in a May edition of the New England Journal of Medicine.

Dr Gruber points out that ACA will increase health care costs in the short term but total costs would ultimately be greater without it.  He also makes the point that ACA will be “increasing the ranks of the insured by more than 10% at a cost that is less than one sixth of 1 year’s growth in national health care expenditures.”

Read the article here. A must-read for companies and others in the industry.

John McCulloch

John provides assistance to life sciences entrepreneurs in business strategy, management, intellectual property, financing and licensing. See more…