Pharma faces Congressional battles in 2009

Industry sees little difference in proposed policies of Obama and McCain

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When BIO, the trade group for biotechnology pharmaceutical companies, held a press briefing on the 2008 presidential election on Sept. 3, Jim Greenwood, the president and CEO of BIO, and a former Republican congressman from Pennsylvania, was asked if BIO would be endorsing either Barack Obama or John McCain for president. He didn't have to think about the answer for very long. "No," he said, explaining that there wasn't enough difference between the two on issues of importance to pharmaceutical companies for BIO to make an endorsement.

Not only are the votes and positions of the two candidates near mirror images on many drug issues (except providing health insurance for the "uninsured"), but so is their rhetoric, which is sharp. McCain tells pharmaceutical companies they "must worry less about squeezing additional profits from old medicines." Obama promises to prevent drug companies from "abusing their monopoly power through unjustified price increases."

The propensity toward populist pandering, plus support for long-time, brand-name anathemas such as reimportation of drugs and greater use of generics, explains why most of the research-based pharmaceutical industry is bringing its political cannons up to the front lines in anticipation of pitched legislative battles in 2009, and not just those led by an antagonistic White House. Congress, which is likely to be more Democratic, will reprise some anti-industry proposals which fell short in the 2007-2008 term, in part because of the threat of a George W. Bush veto, in part because of Republican opposition in the Senate.

But there are some opportunities for the industry in the offing. Both McCain and Obama have talked about extending health insurance to the uninsured, which, if it becomes a reality, would lead to significant new spending on drug prescriptions. Kathryn Wilber, senior counsel, health policy, American Benefits Council, which represents Fortune 500 companies, says, "Health care reform is clearly a priority issue for both candidates."

The Pharmaceutical Research and Manufacturers of America (PhRMA) understands that the elevation of the "uninsured" to the level of primetime issue presents all sorts of possibilities, good and bad. Billy Tauzin, president and CEO of PhRMA, says the group's "Platform for a Healthy America" aims to assure all Americans have access to high-quality, affordable health insurance coverage.

"'Platform for a Healthy America' builds on the existing employer-based system and expands coverage through a public-private approach—with a focus on private health insurance expansions and leveraging such public health insurance programs as Medicaid and SCHIP to extend access to high-quality, affordable health insurance coverage to all Americans," says Tauzin.

Finding the middle
The 'Platform' contains a little bit of the Obama plan and a little bit of the McCain plan; so it might be the kind of middle ground which many observers expect any final health insurance expansion—if there is a final bill—to occupy. McCain's health insurance access proposal centers on eliminating the tax subsidies for employers to provide health insurance and instead giving individuals and families $2500/$5000 tax credits with which to purchase insurance in the private market. Obama would create a national insurance program, run by the federal government, that the uninsured could buy into, if they so desire. "The debate over the Obama plan versus the McCain plan is a little bit of a phony debate," says one lobbyist for the PBM industry. "The final product is probably going to be something in the middle."

A couple factors bear out that compromise notion. There are some key Democrats, such as Finance Committee Chairman Sen. Max Baucus (D-Mont.), who think the employer-provided health insurance system has outlived its usefulness. So in that respect, he agrees with McCain. And there are Republicans who already support an Obama-type plan; it is called the Healthy Americans Act, introduced early in 2007 by Sen. Ron Wyden (D-Ore.), with numerous Republican co-sponsors, including Sen. Charles Grassley (R-Iowa), influential ranking Republican on the Senate Finance Committee. The bill eliminates employer health insurance tax deductions, forces them to pass along what they would have deducted per employee as increased salary, sets up a federal program and allows individuals to buy in, with subsidies to those below 400 percent of the poverty level.

The Wyden bill covers a lot of ground, including changes to the Medicare Part D outpatient prescription program, where the bill gives Medicare the authority to negotiate prices with manufacturers of prescription drugs. Obama supports direct negotiation within the context of both his "access" proposal and within the Part D program.

McCain supports negotiation in Part D just as heartily as Obama does. In November 2003, as the House and Senate were adopting a conference agreement establishing the Part D program, McCain complained that providing an outpatient drug benefit to seniors without first getting drug costs under control was like "rearranging the deck chairs on the Titanic." He expressly bemoaned the absence of a negotiation provision, saying, "Taxpayers should be able to expect Medicare, as a large purchaser of prescription drugs, to be able to derive some discount from its new market share. Instead, taxpayers will provide an estimated $13 billion a year in increased profits to the pharmaceutical industry."

A broader Medicare Part D?
The Medicare Part D reform bill that comes up in 2009 will probably be broader than last year's House and Senate bills, which were narrow in an effort, ultimately unsuccessful, to get a perceived "modest" proposal past a disapproving White House. In 2009, the Oval Office becomes a friend, not a foe, in terms of numerous anti-PhRMA proposals, with regard to Part D and much else. So House Democrats like Rep. Henry Waxman (D-Calif,) are licking their chops. Waxman, chairman of the House Oversight and Investigations Committee, pummeled the drug industry during two hearings in this past session and raised questions about inflated Medicare payments to the prescription drug plans (PDPs) which offer the Part D benefit. "Amendments to Part D will probably be front and center fairly early," says one lobbyist for the drug store industry.

Be they bills on the uninsured or on Part D, rest assured that proposals aimed at cutting prescription drug costs will be flying like hungry birds around a just-stocked backyard feeder. One proposal Obama has made is to set up a federal entity of some sort and charge it with doing "comparativeness research," that is looking at all drugs within a class and determining which one is the most effective. PhRMA supports that kind of research in principle, as long as it is "structured to promote better patient health and timely patient access to needed therapies, and avoids denying or delaying patients' access to beneficial care, as what often occurs in Europe and Australia." Whether the free-standing Comparative Effectiveness Research Act of 2008, introduced by Baucus and Sen. Kent Conrad (D-N.D.) in late July 2008, meets PhRMA's yardstick is unknown.

Reimportation and generics
Obama also supports two proposals which made appearances in past Congresses: reimportation of drugs and wider use of generics, including establishing a first-time regulatory pathway at the Food and Drug Administration (FDA) for biogenerics. McCain is just as enthusiastic about these proposals; in fact, he was championing them long before Obama reached the Senate. As early as 2000, McCain joined with Sen. Charles Schumer (D-N.Y.) to sponsor the Greater Access to Affordable Pharmaceuticals Act, which would have made changes in the 1984 Hatch-Waxman Act designed to prevent brand-name companies from slowing (albeit legally) introduction of generics. That bill passed the Senate by a wide margin in 2002, but never cleared Congress, and would have probably been vetoed by President Bush anyway.

Six years later, that bill is long forgotten, and in its place is the latest generic legislative effort: the Biologics Price Competition and Innovation Act. It would create a pathway at the FDA for approval of biological generics under the Public Health Act, which is the law under which almost all major biologics such as Rituxan, Humira, Herceptin, Tysabri and Avonex are approved. Conventional chemical drugs and a small handful of biologics are approved under the FDA Act, which includes the Hatch-Waxman pathway for generics, which has been well-trod. The Senate Health, Education, Labor and Pensions Committee approved the Biologics Price bill in late June. BIO's Greenwood says the bill is an improvement over an earlier version. But he wants a data exclusivity period of 14 years, not 12, and he has some problems with both the patent and pharmacist prescribing provisions.

Charlie Mayr, spokesman for the Generic Pharmaceutical Association, says the Democratic presidential platform includes an endorsement of both generics and biological generics. The Republican platform is less specific. "Both candidates have gone on record being supportive of generic drugs," says Mayr. "Things are moving forward dramatically with legislation on biologic generics. They will be a reality; it is just a question of time."

Legislation allowing drug wholesalers to import brand-name prescription drugs from developed countries will probably also become a reality. Both Obama and McCain support reimportation, which the pharmaceutical industry opposes.

So come January 20, 2009, whether it is McCain or Obama sitting in the Oval Office, pharmaceutical companies will be dodging the return of some detested drug initiatives, coming at them like so many boomerangs, but at the same time, keeping their heads up amidst opportunities generated by the health insurance access debate. DDN

Stephen Barlas is a Washington, D.C.-based freelance writer.

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