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MEDICAID FORMULARY ACCEPTANCE DELAYS FOR BIOTECH PRODUCTS

Executive Summary

MEDICAID FORMULARY ACCEPTANCE DELAYS FOR BIOTECH PRODUCTS could irreparably damage smaller biotech firms, Biogen CEO James Vincent told an Industrial Biotechnology Association seminar on congressional issues April 24. "If, for example, having to go on some national formulary or set of state formularies costs us a year in getting a product to market and getting reimbursement for it, it can make a difference between whether you are solvent or whether you are not solvent," Vincent remarked. Vincent was alluding to legislation proposed by Sen. Pryor (D-Ark.) that is expected to be introduced in early May. The Prescription Pharmaceuticals Access and Prudent Purchasing Act (PPAPPA), scheduled to take effect by Jan. 1, 1993, would direct state Medicaid agencies to form multiple state prescription drug buying groups to negotiate drug price discounts and rebates from pharmaceutical manufacturers. Under the proposal HHS also would establish a federal drug buying group that would negotiate on behalf of state Medicaid organizations. While most biotech therapeutic products approved so far have been generally recognized as important approvals by FDA, Vincent suggested that formulary acceptance under the Pryor bill could still be problematic for the biotech companies. The biotech industry believes "that there are a long list of negative consequences that could come of that bill for the biotech industry and for our kind of firms even though we are dealing with a high percentage" of important therapeutic advances, Vincent maintained. "If something is done to Merck and it costs them $20 mil. over the next several years because of bad regulation or bad [formulary acceptance], they have a cushion," Vincent contended. However, "when you are dealing with firms of our size, you don't have that cushion," he added. "It could put us out of business in twelve months." At the meeting, IBA Chairman and Immunex CEO Stephan Duzan predicted that the government price controls for pharmaceuticals could undercut important technology gains from biotechnology. "Pricing initiatives would not substantially arrest overall inflation in healthcare [and] might substantially arrest new therapy creation," Duzan maintained, adding: "One can argue that the beginning of a revolutionary period in healthcare -- and biotechnology offers nothing less than that -- is not the time to take such risks." Both the IBA and the Pharmaceutical Manufacturers Association already have submitted arguments opposing the Pryor bill ("The Pink Sheet" April 2, p.3).
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