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THERAPEUTIC INTERCHANGEABILITY OF Rx DRUGS IS PREMISE OF SEN. PRYOR PROPOSAL; PMA CALLS SENATOR’s PREMISE "WRONG," LEGISLATION "UNWISE AND UNWORKABLE"

Executive Summary

The legislative proposal floated by Sen. Pryor (D-Ark.) to reduce pharmaceutical prices paid by Medicaid hinges on the premise that different chemical entities with similar indications are therapeutically interchangeable. This core assumption is likely to be the most hotly debated aspect of the legislation because the pharmaceutical industry sees it as a make-or-break issue. Brandname drug manufacturers will pull out all stops to oppose the notion that a patented prescription product can be replaced with a chemically dissimilar therapeutic substitute, which in turn might be replaced with a generic substitute. The legislation is designed to obtain prescription drug price savings under Medicaid by permitting dispensers to substitute lower-priced but "equally safe and effective therapeutic alternatives" for undiscounted products within the same therapeutic class (see box, p. 7, for proposal's full definition of "therapeutic alternative" ). In addition, the bill would establish a National Pharmacy and Therapeutics Committee to group prescription drug products into therapeutic classes, "based on their medically accepted indications." The panel would comprise scientific and medical experts with knowledge of "appropriate" pharmaceutical use and of "the relative safety and efficacy of different" drug products (the legislation's description of the committee's functions and composition is printed on p. 8). * The legislation stipulates that the National P&T Committee will be a "nongovernmental entity" to be contracted by HHS within one year after enactment. Furthermore, HHS would be prohibited from changing any committee recommendations. Consequently, the proposal would force the department to establish a scientific body that is separate from FDA but is similarly charged with evaluating the safety and efficacy of prescription drugs. HHS would be required to solicit bids to establish a national P&T committee from "at least" the American Society of Hospital Pharmacists, the American Medical Association and the U.S. Pharmacopeia. The three organizations respectively publish American Hospital Formulary Service Dispensing Information, AMA Drug Evaluations and USP-Dispensing Information. Pryor staffer David Schulke floated the idea that USP might be a logical choice to identify therapeutically interchangeable drugs at the group's Quinquennial Meeting in Washington earlier this month ("The Pink Sheet" March 12, T&G-1). Schulke's suggestion received mixed reviews at the USP meeting; delegates defeated three resolutions attempting to define USP's role before they passed a fourth resolution, which states that the organization "is encouraged" to find ways to make USP-DI a "useful resource" for health care reimbursement. At a March 20 session of the American Society of Consultant Pharmacists annual meeting, Schulke contended that HHS could expedite implementation of the legislation by selecting an organization recognized for expert and objective pharmaceutical evaluation to act as the National P&T Committee. The advantage of contracting with an existing entity like USP is that the government would "not have to create some new entity that would have to win the respect" of practitioners, Schulke said. "Hopefully, [HHS] will select somebody who's already out there." Schulke also told ASCP that the key "to make this thing work" will involve "a major educational effort to get the word out to prescribers and to pharmacists about which drugs are regarded by the National P&T Committee as equally safe and effective therapeutic alternatives -- because they will probably be a minority of the total panoply of drugs -- and which have been found after negotiations to be the preferred drug, the best price drug. I foresee that as the toughest part of this deal." In a March 22 response to the Pryor legislation, the Pharmaceutical Manufacturers Association contended that the proposal is wrong in its "basic premise" that products within the same therapeutic category are interchangeable. "Drugs in the same therapeutic class are generally not equally safe and effective for each patient," PMA maintained. The association listed several "hazards" that would result from "forced therapeutic substitution": Pharmacists often are unaware of the prescriber's diagnosis, PMA noted, therefore, they "would frequently face a dilemma when deciding which therapeutic class the prescribed drug is in" because the drugs would be grouped by their indications. Furthermore, therapeutic substitution is "presently unlawful in virtually every state," the association added. PMA further argued that the legislation "is unwise and unworkable" and would establish second-class treatment for the poor. "Regardless of what it is called, the proposal would create a restrictive formulary under which some drugs would be reimbursed and others would not," PMA said. "Medicaid recipients would effectively be denied access to newer, better but more expensive medicines." Pryor concluded during hearings before his Senate Special Committee on Aging that the vast majority of newer and more expensive medicines are rated by FDA as no better or marginally better than older, less expensive therapies. Although the proposal would allow prescribers to override the substitution of therapeutic alternatives, PMA said the provisions "are unrealistic." The association argued that "doctors cannot be expected to remember to depart from the usual prescribing regimen for that fraction of their patients who are on Medicaid rolls." The industry response leaves unsaid the threat posed to manufacturers: doctors persuaded by a National P&T Committee that certain products are interchangeable might prescribe less expensive therapies for all their patients. PMA also argued that the legislation would lead to switching Medicaid patients on chronic drug therapy from one chemical entity to another without their physicians' knowledge. Because the drug with the best price in a given category may change from one bidding period to the next, "physicians could not possibly be current on the low bidder in each of the scores of therapeutic classes." * The association took particular issue with the P&T Committee provisions in that the panel "would not be required to observe basic standards of due process." For example, PMA contended, the committee "(a) would not be required to give notice or an opportunity to be heard to any interested party; (b) could make all its decisions behind closed doors; (c) would not be guided by any rules or regulations; (d) could not have its decisions questioned by anyone, including the secretary of HHS; and (e) would have no procedure by which its findings could be appealed." Furthermore, the association said, "the edicts of an unelected, unaccountable committee in Washington" would substitute "for the judgment of the individual physician who sees the patient and is most cognizant of the patient's needs." PMA also addressed the direct threat to its member companies. The bill places "the major burden" for Medicaid cost savings "on the innovator drug companies." The resulting "reduced profitability would lead inevitably to reduced funding for research and development." In addressing ASCP, Schulke characterized the bidding plan as "a straight, old-fashioned, market economy type swap of volume for better price." Pryor told the society that pharmacists currently "are subsidizing the drug manufacturers" in that they pay full price to the suppliers while Medicaid squeezes pharmacy reimbursements. Pryor reiterated his charges that the government also subsidizes the industry by permitting tax write-offs for R&D expenses and through R&D tax credits and tax credits for locating plants in Puerto Rico. He also told ASCP that the percentage of industry investment in the R&D of breakthrough products is "infinitesimal" compared to the R&D invested in marketing and "me-too" drugs. The senator further contended that the industry practice of increasing prices at will and charging different market segments different prices is "unfair" and "abusing the system." The Arkansas Democrat was sanguine about his proposal's ultimate chances for enactment and admonishing about its potential effect on the industry. The drug manufacturers' "day will come," he said. "It may not come in 1990; it may not come in 1991 or 1992, but it will come, and...I hope they realize the honeymoon may be fast coming to an end." Aware that he is in for a fight, Pryor compared the formidability of PMA as a foe to "Goliath," but he sees his proposal as a "cause" worthy of a David. "There are a lot of issues" which Congress addresses each year, "but there are very few causes," he said. "This is a cause."
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