Health Reform

Pharmaceutical and life sciences companies may benefit from increased revenues from more insured patients through expected coverage expansions. However, health reform legislation is expected to reduce net pharmaceutical revenues through higher discounts, rebates, taxes and fees. This report addresses:

• Increased Medicaid Rebate Rate
• Expansion of 340(b) discounts
• Change in tax treatment of retiree drug subsidy, high-value plans
• Pathway for biosimilar biologc products
• Fees
• Medical Device excise tax
• Timeline

This report addresses a number of the accounting issues that arise from the provisions in the new healthcare law that will impact many pharmaceutical and life sciences companies. These include the annual fee on pharmaceutical manufacturers and the excise tax on medical device manufacturers. Analyses under both IFRS and US GAAP are provided. Please note that the US alert released on 7 April, 2010 only covered US GAAP and that this alert does not change that analysis.

On March 30, 2010, President Obama signed the Health Care and Education Affordability Reconciliation Act, P.L. 111-152, (2010 Reconciliation Act) amending the comprehensive healthcare reform legislation enacted March 23 (Patient Protection and Affordable Care Act, P.L. 111-148) (PPACA). This alert addresses significant tax provisions of both acts (referred to collectively as "the legislation") affecting pharmaceutical and life sciences companies.

This is an update to the Alert issued on April 1, 2010. The changes clarify the impact of the change to Medicaid managed care organizations (MCOs) and the addition of a reference to the change in the calculation for new formulations of existing drugs. Changes are highlighted in bold print. All other points remain unchanged from the original Alert.