REP. STARK’s "TRACEABLE" PRESCRIPTION LEGISLATION BLOCKED FOR THIS CONGRESS; EPO PAYMENT CHANGE, R&E TAX CREDIT EXTENSION MOVE TO BUDGET CONFERENCE

The "traceable prescriptions" legislation proposed by Rep. Stark (D-Calif.) appears dead for this congressional session, despite a last-ditch effort to revive the proposal in the House Ways & Means Committee. The proposal would require that prescriptions for Schedule II-V controlled substances be written on forms traceable to the physician and reported to the state health agency ("The Pink Sheet" Sept. 24, p. 10). It was not included in the budget reconciliation package that the House approved Oct. 16 -- but it then resurfaced in a separate batch of "miscellaneous and technical" provisions that Ways & Means marked up Oct. 18. During the Oct. 18 session, however, the committee approved an amendment by Rep. Gradison (R-Ohio) to strike the provision. Stark has touted the legislation as a revenue-saving measure and as a means of improving the quality of care by reducing prescriptions for controlled substances. Gradison, however, contended that the data supporting the legislation's intended effect are too limited to support passage at this time. Stark is expected to pursue the traceable prescriptions proposal when Congress convenes next year. The Ways & Means health subcommittee chairman can be determined when an issue catches his attention. For example, he has had his eye on Medicare expenditures for erythropoietin since last year. The House-passed budget package contains a committee provision to revamp the EPO payment methodology. Currently, providers receive a flat $40 per administration of the drug. EPO (Amgen's Epogen) is covered to prevent and treat anemia in kidney dialysis patients. The House proposes that payment be based on increments of 1,000-units of EPO. HCFA could pay up to $11 per 1,000 units, with a maximum of $70 per administration ("The Pink Sheet" Oct. 15, T&G-1). The Senate budget reconciliation bill, approved Oct. 19, would not alter the reimbursement method. Both the Senate-passed bill and the Ways & Means panel's catch-all bill of miscellaneous items revive last year's proposal to permit Medicare coverage of EPO when self-administered by the patient. Thus, the plan is likely to survive the House-Senate budget conference. Many home dialysis patients have sought such coverage from HCFA, but Medicare statutes generally prohibit reimbursement for self-administered drugs. The Senate Finance Committee has estimated that the provision would cost $25 mil. each year. The Senate legislation includes a provision extending for one year -- to Dec. 31, 1991 -- the 20% research and experimentation tax credit for qualified research expenditures and the university basic research credit. The tax credit extension was part of the budget summit agreement but was removed from the House bill prior to final passage. The Senate provision deletes the existing special rule to prorate research expenditures incurred during 1990 and is effective for the taxable years beginning after Dec. 31, 1989. The 20% tax credit is allowed to the extent that a company's qualified research expenditures for the current year exceed its base amount for that year. The "base amount" is calculated using the company's gross receipts for the preceding four years. The 20% tax credit also applies to specified amounts of corporate cash expenditures paid for university basic research. The provision modifies and extends the current law for allocation and apportionment of R&E expenditures. The provision is effective for the first two taxable years beginning after Aug. 1, 1989 and on or before Aug. 1, 1991 -- thus the provision applies to the remainder of the year covered by the existing law as well as to the subsequent year. The bill allocates R&E expenditures (as defined by Sec. 174 of the tax code) to one geographic source if they were incurred to meet legal requirements imposed with respect to improvement or marketing of specific products or processes and are not expected to generate any significant income outside that geographic source. For qualified R&E expenditures not specifically allocated to a geographic source, the bill requires that a company allocate 64% of such expenses for research conducted in the U.S. to U.S. source income and 64% of expenses for foreign-based research and experimentation to foreign source income. The bill provides that allocation and apportionment of research expenses be determined as if all members of the affiliated group were a single corporation, with some exceptions for Sec. 936 companies.