Healthcare Reform Expands Coverage, Promotes Innovation - Broader benefits and biosimilars will offset hefty fees and discounts while preserving R&D incentives. - BioPharm International


Healthcare Reform Expands Coverage, Promotes Innovation
Broader benefits and biosimilars will offset hefty fees and discounts while preserving R&D incentives.

BioPharm International
Volume 23, Issue 5


Manufacturers are not complaining too loudly about these costs because they gain a pathway for the US Food and Drug Administration to authorize follow-on biologics (FOBs), the crown jewel in the bill for drug and biotech companies. After years of debate on this issue, innovator firms won an unprecedented 12-year data exclusivity period for reference biotech products, with the possibility of a six-month extension for sponsors who conduct pediatric studies. The Biotechnology Industry Organization (BIO) focused its lobbying efforts on this historic provision, which was steered through Congress by Rep. Anna Eshoo (D-CA), despite strong opposition from powerful legislators and the White House.

The Congressional Budget Office projects that the program will save the government—and cost manufacturers—$7 billion over 10 years. BIO President Jim Greenwood cheered the measure for providing "incentives necessary to attract the massive investment required to speed the discovery and development of the next generation of breakthrough therapies." But Kathleen Jaeger, president of the Generic Pharmaceutical Association, complained that the bill "locks down indefinite brand product monopolies at a deep cost to patients and taxpayers." Timely access to biopharmaceuticals, claims Jaeger, could have produced 10 year savings well over $50 billion.

All manufacturers, however, stand to benefit from clearer policies on developing and regulating biosimilars and "biobetters." The FDA now has to issue guidance on what analytical assays and clinical studies will be needed to document FOB safety, purity and potency, and what criteria could support product interchangeability, a critical issue for marketing and reimbursement. Sponsors will pay the FDA user fees, there's a process for innovators to challenge patent infringement, and Medicare Part B will pay for biosimilars at average sales price plus 6%—an amount considered high enough to encourage physicians to administer less costly FOBs.

BIO also championed a relatively minor provision in the legislation that provides tax credits to small biotech companies (less than 250 employees) to cover a portion of R&D expenditures. The bill establishes a two-year program that offers a total of $1 billion in tax credits to cover expenses related to research on certain critical therapies.

Another plus for the industry is language clarifying that comparative effectiveness research resulting from an expanded national program will not be used to determine coverage or reimbursement decisions by Medicare and other government health programs. The new nonprofit, nongovernment Patient-Centered Outcomes Research Institute will set priorities and support comparative studies with a $150 million annual budget as of 2012. All research will recognize differences in patient populations and will be made public.

More troubling for manufacturers are new sunshine provisions that require broad, national disclosure of payments and reimbursement from pharmaceutical marketers to physicians. The industry also is concerned about a new Independent Medicare Advisory Board, formed to identify ways to slow the growth in Medicare spending. That could affect Medicare drug coverage, but the board won't be up and running until 2014, providing time for Congress to make it more accountable.

Policymakers may not do that, though, as they are anxious to gain any and all savings for the healthcare system. The new law does little to bend the cost curve on national healthcare spending. Instead, it pays for the program through cuts in Medicare provider fees, which could be rescinded, and by imposing additional taxes on high-income consumers and healthcare companies. Tax hikes, though, do little to curb overall healthcare spending, and may boost outlays even more.

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

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