Thursday, February 11, 2010

Healthcare Reform Already Underway

With our politicians stilling sorting through the aftermath of the Massachusetts stunner, I thought I would comment on Healthcare Reform recently enacted and it's impact on pharma and the LifeSciences Industries in general.  Part I, here, will cover what's in some major legislation and Part II, later, will cover the implications for Pharma and the LifeSciences Industry.

Let's start with the American Recovery and Reinvestment Act of 2009
inked into law by President Obama on February 17th, 2009. You might ask "What does this have to do with Healthcare Reform as this legislation was geared to prop up the staggering economy?" The answer is quite a bit.

The legislation is 407 pages long but no less than 70 pages is devoted to Healthcare Reform. According to Wikipedia, $148 billion was set aside for healthcare with $110 billion going to funds for Medicaid to help states through difficult financial times and COBRA subsidies for recession driven unemployment.  In terms of healthcare reform, the most notable topic was $19 million in funding pertaining to healthcare information technology (IT) including electronic health records (EHR) and  $1.1 billion relating to Comparative Effectiveness.

Anyone who has been involved with healthcare understands IT  infrastructure is woefully lacking in healthcare and it's installment is the key element in reduction of healthcare costs and improvement in outcomes.  My own work in Disease Management during the early to mid 90s showed costs of chronic disease could be theoretically reduced by 15% to 30% while improving outcomes.  However in order to really conduct disease management one has to have information regarding patients across all elements of the Healthcare System.  In order to have information, one needs IT systems in place.

Lack of IT in healthcare therefore is mission critical to HC reform.  In general the bill attempts to address critical missing components of Healthcare IT adoption.  These are listed below:
  1. Standard Setting -  The bill provides for the creation of the Health IT Policy and Standards Committees with both public and private input to standardize among other things information exchange standards between different systems.  Without standards particularly for data exchange, Healthcare IT would be rendered useless as silos of information would only show a piece of the total healthcare picture.
  2. Coordination - Makes formal the Office of the National Coordinator for Health Information Technology in HHS to coordinate activities of federal agencies.
  3. Provider Investment - Provision to provide incentive payments to both individual MDs and Hospitals for the installment of IT and EHR.  Early movers in 2011 and 2012 would get even higher incentive payments.  These can be significant.  Up to $18,000.  The reluctance and inability for providers to make IT investments, particularly office based MDs has long been the biggest barrier toward broad IT adoption.
  4. Privacy -  Expands HIPPAA privacy laws and very significantly bans the sale of patient information without patient approval except for research or public health activities.  It also bans the use of patient data for marketing purposes with patient authorization.  More on this later.
Comparative Effectiveness Research (CER)  is also addressed by the bill.  The bill creates the Federal Coordination Council for Comparative Effectiveness Research (FCC-CER).  15 federal agencies will have representation.  Role of the FCC-CER will be to coordinate research efforts and to make recommendations to The Hill.  The Agency for Healthcare Research and Quality (AHRQ) will receive $700 million for funding CER with some money going to the NIH.

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