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Medicare Campbell. Executives will continue to prepare for the new regulations approved under the Medicare Prescription Drug, Improvement and Modernization Act (MMA). These regulations will take effect as scheduled on Jan. 1, 2006. Before the full benefit’s official start, however, the industry faces far more imminent deadlines, which could have a significant impact on the way it does business. For example, pricing and contracting strategies must be developed by the end of first-quarter 2005, and they will have a significant impact on drug reimbursement for years to come. barnett. With more than 40 million current Medicare beneficiaries in the United States, the stakes are high for pharmaceutical companies, and the window for making strategic decisions is small. Choices that pharma companies make in the next 14 months are likely to have far-reaching effects on long-term performance, so companies must take extreme care to avoid costly mistakes. Boily. MMA has drawn close scrutiny by legislators at all levels of government because of the projected costs of providing prescription drugs to the elderly. The Medicare Act will be beneficial in increasing demand for pharmaceutical products. What is far less clear is the extent of the gains for the industry in the wake of off-setting pricing competition and the final number of drug classes that will be included. Peacock. Most people in our industry agree that the next 10 years will bring changes to the Medicare and prescription drug coverage system in this country. While it’s impossible to predict what shape these changes will take, we can predict that it is only through a close working relationship with the government that we can develop a system that works for all stakeholders, one that continues to drive innovation while also providing help for those who need it. Hamelin. On the one hand MMA is going to potentially increase the number of prescriptions as more and more consumers become able to access affordable medications through Medicare, a positive for the industry. But, on the other hand, as the government helps to defray costs to patients, this will invite more and more government control on prices. This type of regulation could move investors away from investing in pharmaceutical companies, thus lowering the amount of available capital and ultimately leading to further pipeline droughts. Kermani. As Europeans we watch closely what happens in the United States as it is the world’s biggest pharmaceutical market and R&D base. For the moment, it does not look as if there will be the dramatic impact on the U.S. industry that has happened as a result of healthcare reforms in certain European countries. In Germany, the government is trying to implement the biggest overhaul of its healthcare system since the 1990s. The government has a long-term healthcare savings target for 2007 amounting to about $25 billion. This has been received very negatively by the pharmaceutical industry and has run into opposition from patients and politicians. Based on the reforms that have been introduced since 1999, the German pharmaceutical industry association estimated that by the end of 2004, sales losses to German industry would reach $3 billion. During 2003, a number of companies in Germany either froze their R&D spending or decreased it. Some even shifted jobs and new investment to other European countries. Other European governments do not want to end up in the same situation as Germany and are talking to the industry about how they can work better together so that reforms do not lead to a decline in the industry’s position. For example, the French government launched a high-profile initiative at the beginning of 2004 to study how it could best stimulate the market so that pharmaceutical companies did not reduce investment in the country. So although many in the U.S. industry might be concerned as to how Medicare reform affects the market and R&D environment, from a European perspective the situation looks quite positive. Choices that pharma companies make over the next 14 months are likely to have far-reaching effects on long-term performance, so companies must take extreme care to avoid costly mistakes. Kevin Barnett Campbell Alliance

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