After hearing the first oral arguments in late March, the U.S. Supreme Court on Thursday upheld the Affordable Care Act (ACA) of 2010, the health care reform law championed by the Obama administration.

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Supreme Court: Health care reform law stays

June 28th, 2012

WASHINGTON – After hearing the first oral arguments in late March, the U.S. Supreme Court on Thursday upheld the Affordable Care Act (ACA) of 2010, the health care reform law championed by the Obama administration.

In a 5-4 ruling, with Chief Justice John Roberts leading the majority, the High Court decided that the ACA's controversial "individual mandate" — which required individuals to buy health insurance or pay a penalty — was constitutional under Congress' authority to levy taxes.

The court also determined that the ACA's expansion of Medicaid eligibility requirements was constitutional but not its stipulation that the federal government can deny states all Medicaid funding if they don't comply. If states decide not to accept the expanded eligibility, they can continue to receive funds for the rest of the Medicaid program, just not the new funding under the act. 

In his opinion, Roberts explained the constitutionality of the ACA's health insurance requirement — the crux of the legal debate in the case, National Federation of Independent Business v. Sebelius.

"Under the mandate, if an individual does not maintain health insurance, the only consequence is that he must make an additional payment to the IRS when he pays his taxes. That, according to the government, means the mandate can be regarded as establishing a condition — not owning health insurance — that triggers a tax — the required payment to the IRS," the chief justice wrote. "Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the government taxes, like buying gasoline or earning income. And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress' constitutional power to tax."

The health reform decision means that starting in 2014, over 30 million Americans previously lacking health insurance coverage will be able to purchase health plans via newly created insurance exchanges set up by states or receive coverage via the broader Medicaid eligibility requirements.

For retail pharmacies, the court's validation of the law will provide a sense of finality and enable them to focus on gearing their businesses for a swell of new patients. Prescription volume should get a boost as more individuals are covered by pharmacy benefit plans, resulting in a positive net impact on revenue and profit. The law also will completely close the coverage gap, or "doughnut hole," in Medicare Part D by 2020, providing those patients with continuous prescription drug coverage.

Still, industry observers have said pharmacies' profit growth could be squeezed by margin compression depending on the mix of coverage for the newly insured population and pharmacy reimbursement rates paid by state Medicaid programs and insurers in the exchanges.

Another potential benefit for drug chains could be a bigger role for community pharmacy in the nation's health care system as Americans seek more affordable options for medical care. Newly insured individuals going to drug stores for prescriptions will also see pharmacies' menu of other health services, such as immunizations, primary care and medication counseling. Walk-in clinics at drug stores also are likely to get more attention those consumers.

"As we have said all along, health care reform remains a constant pursuit," Steve Anderson, president and chief executive officer of the National Association of Chain Drug Stores, said Thursday in a statement on the court's historic ruling. "With the Supreme Court's decision today, the best approach for future progress continues to be saving lives, enhancing patient care and reducing health care costs. NACDS and the pharmacy industry we represent have the power and potential to help achieve these goals."

With the Supreme Court's decision, B. Douglas Hoey, CEO of the National Community Pharmacists Association, pointed to some of the key issues for community pharmacies during the health reform debate.

"The health care reform law that was upheld by the Supreme Court includes bipartisan provisions intended to achieve reasonable reimbursement for Medicaid generic prescription drugs, although the implementation process to date has been disappointing," Hoey stated Thursday. "There are also transparency requirements for pharmacy benefit managers in the health care exchanges set to launch in 2014. Medication therapy management will be expanded in Medicare. Independent community pharmacies remain exempted from the duplicative accreditation requirement for selling Medicare Part B durable medical equipment. Mechanisms have been put in place for the inclusion of pharmacies in accountable care organizations and medical homes. In the aftermath of the Supreme Court decision and the government's response to it, NCPA will continue to prioritize these issues because, left unaddressed in a prudent fashion, it is patients who will suffer the consequences."

President Barack Obama said the Supreme Court ruling will enable the nation to go forward and realize the benefits envisioned by the ACA.

"The highest court in the land has now spoken. We will continue to implement this law. And we'll work together to improve on it where we can," Obama said. "But what we won't do, and what the country can't afford to do, is re-fight the political battles of two years ago or go back to the way things were."

Earlier this month, a New York Times/CBS News poll found that 41% of Americans wanted the Supreme Court to overturn the entire health reform law, and 27% wanted the court just to strike down the individual mandate. Only 24% wanted the court to uphold the entire law.

*Editor's Note: Article updated with industry comment and president's remarks.