Print
Email
Print Edition StoriesFriday, November 13, 2009
Biotech, pharma foresee higher costs from House health reform bill
By Julie M. Donnelly
MHT's Galen Moore: Honoring innovation in New England
Funding drugs for rare diseases
The Departed: MHT tracks Greater Boston companies leaving, shutting down
The biotechnology and pharmaceutical industries are warily eyeing a U.S. House health reform bill that would double the financial burden on the industry.
While the bill lacks some of the fees proposed by the Senate, the House’s tighter price controls on drugs covered by government programs would likely bring the total industry cost to $150 billion to $160 billion, compared with the $80 billion cost associated with the Senate version, according to an analysis by the Wall Street Journal.
Both chambers plan to increase the discount on Medicaid drugs to 22.1 percent of the average manufacturer’s price, from 15.1 percent. The House bill also calls for a larger number of the uninsured to be placed on Medicaid, instead of receiving government subsidies for private insurance. This means that while drug companies are expected to reap additional revenue from the newly insured, more of those new consumers will be buying the drugs at the Medicaid discount.
Another beef that pharmaceutical and biotech companies have with the House bill is that it eliminates the so-called “doughnut hole” in the Medicare Part D prescription plan. Currently the Part D program pays for seniors’ drugs up to $2,700, then seniors must pick up the tab from $2,700 to $6,100, when Part D starts covering the medications again.
Lobby group PhRMA had negotiated something different with the Senate finance committee — a 50 percent discount on drugs that fell into the so-called doughnut hole, rather than having the drugs covered by Medicare Part D. PhRMA officials say the move would save seniors $30 billion and would limit the hit to drug manufacturers because if the drugs that fall into the doughnut hole were covered by Medicare Part D, they would be heavily discounted.
“Extending price controls don’t work. They create shortages and access problems,” said Ken Johnson, senior vice president at PhRMA, who also said one particular provision of the House bill — extending drug discounts to poor seniors eligible for both Medicare and Medicaid — would result in 100,000 lost jobs in the industry as companies grapple with severely curtailed revenue.
Some of those job losses would likely hit close to home. The number of biotech workers in Massachusetts was 45,905 last year, and several of the world’s largest pharmaceutical companies, including Shire, Pfizer, Bristol-Myers Squibb, and Sanofi Aventis, have operations in Massachusetts.
Still, some companies found that the House bill wasn’t as bad as it could have been. Lexington-based Cubist Pharmaceuticals was relieved to learn that discounts for government health programs outside of Medicaid and Medicare would not be extended to cover inpatient medications. Cubist makes the drug Cubicin, which is used to treat hospital-borne illnesses. The discounts have, until now, only applied to drugs given in an outpatient setting. Mark Battaglini, Cubist’s vice president for government affairs, said extending the discount had been discussed in the Senate and would seriously cut into Cubist’s revenue.
A win for local companies that make biologic drugs, including Genzyme Corp. and Biogen Idec, is that both the House and the Senate have proposed a 12-year period of data exclusivity before drug companies can produce generic versions of biologic drugs.
“So far Congress has decided to protect innovation,” Bob Coughlin, president of MassBio, said. “Twelve years is what Ted Kennedy proposed in his committee and the House has followed suit.”
Battaglini said it’s too early to make a final judgment on the national health overhaul. He said the real test will be when the two chambers get together to hammer out a compromise.
“You just don’t know what they’ll do once they get behind closed doors,” he said. “That’s the thing that scares the bejeezus out of most of us.”
RSS Feeds
Comments
Please Login/Register to post comments.
No comments have been added or approved.