A first order of business for many Democrats is to simplify and centralize the Part D program. Biopharmaceutical manufacturers
strongly supported the decentralized approach to Part D to avoid establishing a Medicare formulary that would set a coverage
and cost model for the broader healthcare market. PDPs consequently have crafted drug coverage programs to fit federal standards
as well as corporate business goals. Noticeable differences among PDP formulary preferences, copayments, and premiums have
generated competition and cost variation, but also have confused seniors. A particular sore point is rising coinsurance for
high-cost biotech therapies that fall into the fourth tier of many formulary structures.
Allowing direct price negotiations by the HHS secretary could cut manufacturer revenues by some $10 billion to $30 billion,
according to the Boston Consulting Group. The amount could be even more if private insurers and pharmacy benefit managers
demand the same low price set by Medicare. The real impact of direct government price negotiations is unclear, though. There
isn't much room to negotiate lower prices for drugs that have no therapeutic alternatives or for therapies in those classes
where Medicare requires coverage of all medicines. Manufacturers may be reluctant to accept a very low price that could extend
to the broader market, but it will be difficult to refuse to sell a product to the huge Medicare population.
Another strategy for curbing Medicare drug outlays is to require manufacturers to pay rebates to CMS. This could start with
reimbursement for drugs provided to dual-eligible seniors in PDPs, those low-income individuals who previously obtained drug
coverage from state Medicaid plans.
IMPORTS AND BIOSIMILARS
Another cost-cutting strategy backed by both Democrats and Republicans is to liberalize re-importation of drugs from other
countries. Obama makes the usual proviso that the drugs coming in must be safe and effective. But taking steps to ensure product
quality appears to limit potential savings. Several state and local drug import programs have been dropped because of high
costs and low consumer interest.
Moreover, recent scandals about contaminated heparin from China and manufacturing quality problems with generic drugs from
India are making lawmakers hesitate about opening the gates too wide to less regulated imports. Obama advisers have acknowledged
that enthusiasm for reimportation has waned since the heparin incident.
What may be more palatable is to make generic drugs more readily available to patients and payers. At the annual meeting of
the Generic Pharmaceutical Association in September, Obama health policy adviser Dora Hughes said that eliminating barriers
to generic drug use should be central to health reform efforts. Hughes voiced support for curbing reverse payment agreements
and backed legislation that would allow the FDA to approve generic versions of biotechnology drugs. A market exclusivity period
for brand-name biotech therapies, she noted, should be much shorter than the 14 years advocated by the biotechnology industry.
Although savings may be elusive from many of these cost-cutting policies, the reforms are likely to gain approval by Congress
and support from the new administration. Political leaders believe that tightening up the rules will allow HHS to ratchet
down outlays and curb waste and abuse. And the prospect of some $60 billion in savings is much too attractive for anyone to
pass up in these tight-money times.
Jill Wechsler is BioPharm International's Washington editor, Chevy Chase, MD, 301.656.4634, email@example.com