Biotech Drug Prices Under Scrutiny - Efforts to cut spending on healthcare will focus on outlays for prescription drugs by Medicare and other health programs. - BioPharm International


Biotech Drug Prices Under Scrutiny
Efforts to cut spending on healthcare will focus on outlays for prescription drugs by Medicare and other health programs.

BioPharm International
Volume 22, Issue 2


Other strategies for cutting expenditures are less promising, says CBO, despite all the rosy predictions last year about how certain innovations would save billions and improve quality of care. Wider adoption of health information technology, for example, would require considerable up-front investment and thus would reduce overall spending only modestly.

Prevention and disease management programs may moderate the need for expensive care for some patients, but such initiatives have costs, especially if provided for large populations. Anti-obesity and anti-smoking campaigns that enable people to live longer, moreover, may increase demand over the long run for more care for the elderly. Modifying the system for determining medical malpractice similarly would only have a modest impact on total healthcare expenditures. And funding research that compares the effectiveness of different treatment options may have long-term benefits, but high front-end costs.

Similarly, the CBO predicts that permitting the federal government to negotiate lower Medicare drug prices with pharmaceutical companies is likely to produce small savings. The Secretary of Health and Human Services (HHS) might negotiate small savings by persuading manufacturers to reduce prices for select single-source products, but the agency would not have sufficient leverage to secure significant discounts.

Moreover, the high cost of filling in the dreaded Part D coverage gap rules out that strategy. Such a move, says the CBO, would cost $42 billion during 2010–2014 and $134 billion over 10 years.

These issues will be examined closely in coming months as Congress tackles critical health policies. The legislators moved quickly to reauthorize the State Children's Health Insurance Program (SCHIP). Now they are working to gain agreement on a 2010 budget, tax changes, and additional economic stimulus proposals.

Looming ahead is the Medicare physician pay fix. Last summer, Congress enacted a limited Medicare reform bill that put off hard decisions on revising Medicare's outmoded payment system for doctors and set the stage for another heated battle over Medicare rates. A lot of skeptics maintain that there's no time to address broad health issues this year, but reform advocates insist that American industry cannot be competitive globally unless the nation develops a more efficient and cost-effective healthcare system.

Jill Wechsler is BioPharm International's Washington editor, Chevy Chase, MD, 301.656.4634,


1. Congressional Budget Office [homepage on the Internet]. Key Issues in Analyzing Major Health Insurance Proposals. 2008 Dec [cited 2009 Jan 2]. Available from:

2. CMS Office of the Actuary, Health Affairs. National Health Spending in 2007. 2009 Jan/Feb;28(1).

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