Pharma Could Be Going Back To Negotiating Table On Federal Drug Cost Cuts
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After its protracted deal-making on the health care reform bill in 2009 and 2010, the biopharmaceutical industry may be headed back to negotiations with the White House on proposals to cut drug spending in Medicare. The vaguely-worded Medicare cuts outlined in President Obama’s deficit reduction plan April 13 could be viewed as an opening gambit. Lowering spending for prescription drugs is a significant component of the Obama administration’s plan, which recommends savings and cuts in federal programs estimated to reduce the national deficit by $4 trillion in 12 years or less (Also see "Obama Deficit Reduction Plan Takes Aim At Drug Costs, Strengthens IPAB" - Pink Sheet, 13 Apr, 2011.). This includes Medicare and Medicaid savings of $480 billion by 2023. In a speech on the proposal, Obama said, “We will cut spending on prescription drugs by using Medicare's purchasing power to drive greater efficiency and speed generic brands of medicine onto the market.” He added, “We will slow the growth of Medicare costs by strengthening an independent commission of doctors, nurses, medical experts and consumers who will look at all the evidence and recommend the best ways to reduce unnecessary spending while protecting access to the services seniors need.” While few details are available, the ideas mentioned borrow from previous spending proposals, including the White House’s proposed 2012 budget and the report of the president’s bipartisan fiscal commission in 2010, including:
The fiscal commission recommended mandatory Medicaid-level rebates on drugs used by Medicare Part D beneficiaries who are also eligible for Medicaid – the dual eligibles – and a White House fact sheet notes that the president’s plan for Medicare drugs is “similar to what was called for by the bipartisan fiscal commission.” The president’s 2012 budget proposal discussed “speeding up” the availability of generics, meaning reducing the exclusivity period for innovator biologics from the 12 years to seven years. The Affordable Care Act established 12 years of exclusivity in provisions creating a biosimilars approval pathway. The plan also borrows from the fiscal commission report in recommending strengthening the Independent Payment Advisory Board, which, with its already broad powers to create new payment policy for Medicare under ACA, has become the focus of opposition in the pharmaceutical industry. Under current statute, IPAB recommendations to reduce Medicare would be triggered when Medicare spending per beneficiary grows at a rate equal to the GDP per capita plus 1%. The White House proposes to lower the target to GDP per capita plus 0.5% The fact sheet says the plan would also “give IPAB additional tools to improve the quality of care while reducing costs, including allowing it to promote value-based benefit designs that promote proven services like prevention without shifting costs to seniors,” and “give IPAB additional enforcement mechanisms such as an automatic sequester as a backstop for IPAB, Congress, and the Secretary of Health and Human Services” (A sequester generally means that programs are cut across-the-board by an equal amount.) The deficit reduction framework is posed as an alternative to House Budget Committee Chairman Paul Ryan's, R-Wisc., recent budget proposal, with the plans staking out the two ends of a debate on how to reduce costs. Ryan's budget package calls for privatizing Medicare by allowing Medicare beneficiaries to choose from an array of private health care plans, which would receive premium support from the government ( (Also see "GOP Budget Draws Upon Part D As Model For Reforming Medicare" - Pink Sheet, 11 Apr, 2011.).) It also would eliminate IPAB. While Ryan’s budget outline passed the House April 15, it has little chance of making headway in the Senate. To help guide the congressional debate on deficit reduction, Obama proposed creating a bipartisan, bicameral negotiating committee. Obama asked Senate Majority Leader Harry Reid, D-Nev., House Speaker John Boehner, R-Ohio, House Minority Leader Nancy Pelosi, D-Calif., and Senate Minority Leader Mitch McConnell, R-Ky., to each designate four members from their caucuses to participate in negotiations led by Vice President Joe Biden, beginning in early May. Clinton Advises PhRMA To Offer Alternatives Former President Bill Clinton made an appearance at the Pharmaceutical Research and Manufacturers of America’s annual meeting on April 14 and gave some advice on how industry should respond to the administration’s plan. Clinton acknowledged that industry’s deal with the administration and congressional Democrats on health reform provides a basis for its opposition to the new White House proposal. “I personally thought a good deal was made by the pharmaceutical industry in the health care [reform] bill,” he said. “Therefore, I can understand why you’re opposed to what the president said.” In its health reform deal, biopharmaceutical manufacturers agreed to contribute to lower health care costs through various rebates, discounts and fees, helping to ensure passage of the Affordable Care Act. In return, sponsors of the legislation blocked inclusion of such unfavorable provisions as mandated rebates in Part D, and ensured the longer exclusivity period for innovator biologics in the biosimilars program. But that was then, and with budget deficits now the big topic of debate and the administration threatening to revisit the agreement, what can the industry do? “My argument to you is the same argument that I made to my friends involved with the White House: if you don’t like it, come up with a counter proposal,” Clinton said. He emphasized the importance of reforming the health care system in a way that does not cloud the drug industry’s future or the U.S. economy. “Think about reforming systems to do what they can in a way that allows us to rebuild the American economy,” Clinton urged. “We could easily cut the pharmaceutical budget and cut the healthcare costs, but … we wouldn’t be in the ‘future business’ if we destroyed the [industry’s] research and development capacity and capacity to keep people alive, so a lot of these questions are not easy.” Taking A Firm Position PhRMA Chairman Christopher Viehbacher, CEO of Sanofi-Aventis, signaled in his address to the meeting that the group will focus on the R&D argument in response to the administration’s proposal. “It is very clear the president’s speech contains an awful lot of things that would be very detrimental to research and development and are not about to achieve his objectives … of continued economic growth and creating jobs,” Viehbacher said. Fewer resources for R&D will also mean fewer cures, he added. Viehbacher also signaled that PhRMA is ready for tough negotiations. “We supported health care reform because we supported the notion of affordable access to healthcare for all. We also believe that that support was the best way to promote research and development,” he maintained. “We don’t want to take quick and hasty decisions. But it is also clear that if we do not take very firm positions and really understand what we stand for and defend those principles, research and development and hope for the patient is clearly at risk.” |