Part D Rebates, Tax On Patent Settlements May Be Added To Senate Finance Cmte. Bill

Sen. Bill Nelson of Florida readying to offer major amendments that would significantly impact the drug industry in Committee markup.

The positive impact of the Senate Finance Committee health reform proposal on the pharmaceutical industry could be imperiled by two amendments being readied for introduction during markup of the bill.

Sen. Bill Nelson, D-Fla., is ready to move forward with two major amendments: Medicare Part D rebates and an excise tax on brand-generic drug settlements.

Under one amendment, drug manufacturers would have to pay rebates on drugs for beneficiaries under the Medicare Part D drug program who are also eligible for Medicaid. Nelson would offer the amendment along with Finance Committee Health Subcommittee Chairman Jay Rockefeller, D-W. Va.

The House Energy & Commerce Committee's Affordable Health Choices Act currently includes the provision. Under that proposal, the legislative language states: "covered outpatient drug the manufacturer dispenses after December 31, 2010 to full-benefit dual eligible Medicare Part D enrollees for which payment was made by a Part D plan."

CBO scored the Part D dual-eligible rebate proposal as saving the government $29.7 bil. over 10 years.

Under one method of slicing the numbers, drug manufacturers would stand to lose the majority of new business- $35 bil. over 10 years - they could gain as a result of the Finance Committee proposal from the insertion of the Part D rebates measure (Also see "Pharma's Reform Bounce: How Big A Boost Will $80 Bil. Buy" - Pink Sheet, 21 Sep, 2009.).

The second proposed amendment to the bill would impose an excise tax on patent challenge settlements when generic drug manufacturers challenge the validity of a brand name drug patent.

Both amendments would raise "substantial additional revenue," Nelson said Sept. 22, the first day of the mark-up.

Senate Finance Committee Chairman Max Baucus, D-Mont., requires that any amendments to the proposal that increases its cost would have to have commensurate offsets pre-scored by the Congressional Budget Office before it could be offered.

However, because the amendments would raise money instead of spend it, Nelson has the green light to offer the provisions during the markup or later on the Senate floor, if he so wishes.

CBO Director Doug Elmendorf and Joint Committee for Taxation Chief of Staff Thomas Barthold both said at the markup they had not yet had a chance to score the impact of the two amendments but would do so shortly.

MedPAC vs. Baucus Medicare Commission

Baucus unveiled details of the legislation, America's Healthy Futures Act of 2009, in the form of a "chairman's mark" on Sept. 16.

The bill was modified to include a number of new provisions in order to strengthen support among Democrats and possibly win over one or more Republicans on the Committee. There have also been over 500 amendments filed for consideration, including a number of drug provisions (Also see "Health Reform Markup: Some Amendments Will Seek Higher Fees On Drug Firms" - Pink Sheet, 21 Sep, 2009.).

One proposal currently in the bill that was the focus of criticism from Rockefeller as not being strong enough is the creation of a Medicare Commission to control the programs costs.

The independent commission would submit proposals to Congress aimed at extending the solvency of Medicare, slowing cost growth and improving quality of care for beneficiaries. It would aim to reduce Medicare spending by targeted amounts compared to the trajectory of spending under current law. The 15 members of the commission would be appointed by the President.

Rockefeller has proposed shifting authority over Medicare payment rates from Congress to the already established Medicare Payment Advisory Commission (MedPAC).

Under the Baucus proposal, Congress would have the opportunity to overrule any recommendations by the Medicare Commission if they can pass an alternative proposal that achieves the same cost savings between January and August of a given year. After the August deadline, the Commission's recommendations would automatically be adopted.

"Congress still has the opportunity to vote recommendations down. This is not what I want," Rockefeller said. "I very much fear that the Congress would not fail to act and I very much fear that Congress would turn them down."

He added, noting the number of health care lobbyists trying to influence health reform legislation: "I don't want Congress to be able to vote on it because I don't want lobbyists to be able to vote on it, if I make myself clear."

-Ramsey Baghdadi ([email protected])