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PhRMA President: ACA Has Raised Out-of-Pocket Health Care Costs

4-11-14

The rollout of the Affordable Care Act has been contentious throughout the country, particularly in the business community. PhRMA President and CEO John Castellani told NJTV News Managing Editor Mike Schneider that the new health care law has changed the way care is provided and has lowered premiums, but raised out-of-pocket expenses.

“There is a real political imperative to have a low premium,” Castellani explained. “But to have a low premium, there are very large out-of-pocket expenses and first dollar expenses for patients. And so what we’re gonna have to watch very carefully is how that affects patients, particularly those with chronic diseases, and their ability to continue to afford their medicines.”

According to Castellani, employer-provided systems typically included out-of-pocket expenses between $1,000 and $1,500 before insurance covered most additional care. But with the new broadest plans, he said out-of-pocket expenses were approaching $6,000 and even the silver plans had out-of-pocket costs between $2,500 and $2,600.

“You think about particularly lower income patients who are now going to have to be paying much more money for needed medicines, particularly if you’re a diabetic or you have hypertension or other chronic diseases that need, obviously, day-to-day medication, day-to-day attention,” Castellani said.

Although there have been many changes in the health care industry, Castellani said New Jersey is the “medicine chest of America” with 70,000 direct employees in the biopharmaceutical industry. “The companies that do the research and develop the medicines buy $8 billion a year in goods and services in the state. So it is a very, very vibrant part of the state economy,” he said.

Other industries have moved away from doing business in New Jersey because of high taxes and the cost of living. But Castellani said the Garden State provides what the health care industry needs.

“The industry goes where it has what it needs to be able to conduct the very extensive research that it conducts. So first and foremost, you need a strong scientific ecosystem. And that ecosystem are not just the scientists that our companies employ in their labs. It’s the scientists that are associated with the colleges and universities, the hospital systems. And New Jersey has that ecosystem,” he said.

Having a large presence in New Jersey is good for the state, but also beneficial for patients, according to Castellani. “It’s a great economic boon as well as a great benefit for patients. Every other country in the world wants it,” he said. “You see not only the great economic benefits, but obviously the great therapies.”


“it’s interesting, the affordable care act in and of itself has a direct impact that analysts have said costs the pharmaceutical industry about $120b over the eight-year period thjat itw as projected when it was first enacted. and that’s money in fees and in discounts, things like the so-called donut hole and the medicare drug benefit expense. but that’s probably not the biggest thing. what we are seeing is the affordable care act is being enacted particuplary in states where they’re standing up exchnages, is there is a real political imperative to have a low premium. but to have a low premium, there are very large out of pocket expenses and first dollar expenses for patients. and so what we’re gonna have to watch very carefully is how that affects patients, particularly those with chronic diseases. and thheir ability to continue to aford their medicines.”

is there a sense that that is imperalled? “well if you think about it from the context that this was supposed to reflect an employer provider system where typically you had out of pocket expenses that were $1,000, $1,500 before the insurance covered most everything. in some of the most broadest palns, we were seeing out of pocket expenses that were approaching $6,000. and even in the silver plans, $2,500, $2,600 and these would be out of pocket expenses for therapies, including medicines. and again, you think about particluary lower income patients who are now going to have to be paying much more money for needed medicines, particularly if you’re a diabetic or you have hypertension or other chronic diseases that need obviously day to day medication, day to day attention.”

there has been revoultion within industry itsefl. mergers, aquicistions, expansions. nj’s place within this industry. “It’s the medicine chest of america. there’s 70,000 direct employees in the biopharmaceutical industry in nj. there’s another 270,000, 250,000 additional ones. the comps that do the resarch and develop the medicines buy $8b a year in goods and services in the state. so it is a very, very vibrant part of the state economy. and it’s a treasure, whereever it is.”

industry that is comfortable with nj’s economy, tax structure? we hear so much about nj having trouble retaining businesses bc of the high cost of living, taxes. why the industry stay here? “The industry goes where it has what it needs to be able to conduct the very extensive research that it conducts. so first and foremost, you need a strong scientific ecosystem. and that ecosystem are not just the scientists that our companies employ in their labs. it’s the scientists that are associated with the colleges and universities, the hospital systems. and nj has that ecosystem.”

“It’s education, it’s experience, it’s the kind of support that surrounds this industry that allowst he discovery process to move forwrad. It’s here. it’s always tenuous. it’s a great economic boon as well as a great benefit for patients. every other country in the world wants it. so they want it in china, they want it in india and brazil, they want it in mexico bc you see no tonly the great economic benefits, but obviously the great therapies.”