For businesses, Supreme Court ruling provides a measure of clarity in health care calculations
Published on June 29, 2012
By: Robert Weisman for Boston Globe
The Supreme Court decision largely upholding President Obama’s health care overhaul was the talk of the business world Thursday. But executives weren’t speaking with one voice.
Biotechnology leaders hailed a provision creating an approval process for generic versions of their medicines while also protecting the original drug makers’ brands for a longer period.
But medical device executives warned that a tax to help pay for the law will cost their industry $29 billion over the coming decade, sapping funds for research and hiring workers.
Health insurance companies in Massachusetts said the high court ruling won’t dramatically change their marketplace because many provisions of the federal law — including the requirement that almost everyone buy insurance or pay a penalty — are already in effect here.
“Our business will not be substantially affected,” said Andrew Dreyfus, chief executive of Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer.
Nationally, however, the law will draw more healthy people onto insurance rolls — creating more customers — while also potentially boosting costs by requiring insurers to cover people with preexisting conditions and continue coverage when they get sick.
“This will make insurance more expensive in other states,” said Philip J. Edmundson, chief executive of William Gallagher Associates, the largest New England insurance broker.
Employers, for their part, were bracing for new rules and insurance pricing that could force them to spend more to offer health coverage for workers. But as with insurers, the impact will be less in Massachusetts, where most of those rules are in place.
With the requirement that other states form Massachusetts-style health insurance exchanges covering all comers, some businesses might opt to “cash out” employees, giving them money to buy insurance themselves rather than providing health coverage, said, a Harvard Business School professor specializing in health care.
“I’ve never heard a CEO say, ‘You know what I love about my job? I love buying health insurance,’ ”said.
There was broad agreement on one front: The justices’ decision to uphold most of the law’s provisions provided a measure of certainty for businesses, even if parts of the ruling weren’t welcomed.
The reaction of Robert Friel, chief executive of laboratory tool maker PerkinElmer Inc., of Waltham, was typical. While he doesn’t like the medical-device tax, which will cost his company an estimated $5 million a year, he said that consideration was offset by the benefits flowing to medical technology companies from an expanded base of insured customers.
“You’re giving potentially 50 million Americans access to health care,” Friel said. “So that will be positive for the industry because it creates demand” for PerkinElmer’s diagnostic systems and related products.
In the biotechnology sector, the clarity on health care was also applauded — especially the “data exclusivity” provision that will give companies a dozen years of protection before competitors can introduce biosimilars — generic versions of biotech drugs.
“It’s good news for the biotech industry,” said Richard Pops, chief executive of Alkermes Inc. in Waltham. “This was a highly engineered and negotiated law. If it had been struck down in whole or in part, it would have created a lot of uncertainty.”
George Scangos, chief executive of Biogen Idec Inc. in Weston, had a mixed reaction. “There are aspects of the law that got it right, and there are aspects that need work,” he said. “We want a set of policies that enable us to do what we came to Biogen, and to biotech, to do: develop innovative drugs.”
Scangos said the 12-year protection from generic competition “strikes a nice balance between giving companies incentives to develop new drugs and getting biosimilars onto the market that can provide similar benefits at lower costs.”
But he is wary of another piece of the act that creates a payment advisory board charged with keeping health care cost increases below an inflation target. The idea of a board may be well-meaning, he said, but it’s “ill-conceived and will have unintended consequences.”
Still, for many in the world of commerce, even those for whom rising health care costs have proved an obstacle to growth, the Supreme Court decision was a signal that it was time to get on with the business of implementing the national health care law.
“Some employers were thinking this whole thing could go down,” said Alden Bianchi, a partner specializing in employee benefits at Boston law firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo. “Now it’s full speed ahead. This is the law, it’s constitutional, and it’s going to go forward.”
Harvard Business School professor, a former chief executive of the medical device maker Medtronic Inc., said employers are obliged to help the overhaul succeed.
“It’s the law of the land,” he said. “We’ve had three and a half years of politics; I believe it’s time to get on and make this health care law work. The only way to make it work is to go upstream and make Americans healthy. We have to work on fitness, we have to work on diet. Employers need to take responsibility and give their employees financial incentives to be healthy.”
Some supporters of the 2006 Massachusetts health care overhaul said the nation’s top court vindicated the state’s move to require near-universal health coverage — and its insurance-buying mandate — even if costs aren’t completely in check.
“This was a great victory for the American people,” said James Roosevelt Jr., chief executive of Tufts Health Plan. “The Supreme Court has reached a decision that provides certainty for insurers and businesses and establishes the principle that we’re already comfortable with in Massachusetts.”
But not everyone was happy. Michael R. Minogue, chief executive of Abiomed Inc., a Danvers maker of heart pumps and artificial hearts, warned that the medical device tax — which he believes should not have been included in the law — would stifle innovation.
“The device tax, in our mind, is really not part of health care reform,” he said. “It’s a policy decision, and we think it’s bad policy because it’s going to have a negative impact on jobs.”