Obamacare will be good for Indian pharma and IT

The US Supreme Court passed the landmark ruling dubbed Obamacare thereby upholding the controversial massive reform of health care coverage which was initiated by President Barack Obama. Simply stated, Obamacare or Patient Protection and Affordable Care Act requires most American to have health insurance. The act comes into effect from 2014.

Not obtaining an insurance in 2014 will cost a person $95 or 1% of his income, whichever is higher as penalty. In 2015, it will be $325 or 2% of income. For families the penalty would be $285 per household or 1% of the income whichever is greater. By 2016, it goes up to $2,085 per family or 2.5% of the income. Penalties will rise every year. At present, there are 250 million Americans insured and Obamacare will add an additional 26 million policies to health insurance.

The governments, both state and federal, on their part will be subsidising the plan. Federal health spending is expected to rise from 5.6% of GDP in 2011 to 9.5% of GDP in 2035.

While the development is great news for American insurance, pharmaceutical and hospital companies, Indian pharmaceutical companies too will be benefited. Nearly 75-80% of all prescribed drugs sold in the US are generic drugs, an area where Indian companies are strong. In order to keep the cost of medical treatment low, insurance company will prefer to use the generics route. 

As pointed out by Express Pharma, Indian companies tend to gain from one of the sub legislations of the Act, titled the Biologics Price Competition and Innovation Act (BPCIA). This allows a ‘biosimilar’ or an ‘interchangeable’ off-patent drug. Indian companies generally operate in the ‘biosimilar’ space.

Apart from the direct benefits to the pharmaceutical sector, the IT space is also expected to benefit in a big way as new systems need to be created to monitor the health insurance plan. Each state is expected to have an “insurance exchange” where smaller businesses can buy insurance at rates which were earlier available to bulk corporate buyers.