>Uncertainty prevails - Budget reconciliation is the best way forward

President Obama's efforts to converge the Democrats and Republicans on a common plane with respect to Healthcare Reform through a televised healthcare summit held on February 25, 2010 have failed. The Senate Bill with amendments suggested by President Obama was discussed in detail for over seven hours. No headway was made; and it is now clear that the difference in views held by the Democrats and Republicans is too profound to be bridged. Presently, a great deal of uncertainty prevails on passage of the bill. Some major areas wherein Republicans do not appear to agree with Democrats:

■ Inclusion of new people: Republicans do not like the idea of forcefully inducting so many new people in insurance programs, as this would increase healthcare expenses and customers will not get the quality of healthcare they should

■ Increase in taxes: The healthcare spending increase would be funded through taxes at this point in time. Addition of more people could lead to newer taxes and surcharges and will result in increasing out-of-pocket expenses for the Americans

■ Reduction in Medicare spending: Any reduction in Medicare spend will lead to reduced quality of healthcare for the elderly and also result in doctors opting out of the programs, further impacting quality of healthcare

■ Overall increase in healthcare spend: Republicans strongly believe that the proposed healthcare bill will lead to a rise in overall healthcare spending for the US and not serve the primary objective of reducing healthcare expenses

■ Scrap, start all over: Republicans have been critical of the proposed bill and opine that the existing bill is scrapped and reforms are started all over.

Budget reconciliation is the best way forward

Debate over the reforms appears to be 'political posturing' by both parties and each side is firm about their respective ideology. Despite strong opposition from the Republicans, Democrats are not inclined to start the reforms all over. They have set a deadline for passing the reform bill in the next 4-6 weeks. This implies that the only way forward is to opt for the 'Budget Reconciliation' procedure whereby some changes to the already approved Senate Bill can be made and approved by the Senate through a simple majority (51 votes out of 100). The House would also pass the reconciled bill, along with the original Senate bill.

Impact on Indian Generics

Overall, the Senate bill with amendments suggested by President Obama is extremely positive for Indian companies. If President Obama is able to pass the Healthcare Reform Bill through the Reconciliation procedure, Indian generic drug makers could gain as we have discussed in our previous notes on US Healthcare Reforms.

To read the full report: BUDGET RECONCILIATION