Healthcare Reform Threatens Biotech Coverage and Access

Published on: 
BioPharm International, BioPharm International-06-01-2008, Volume 21, Issue 6
Pages: 40–45

The comparative research approach may be preferable to price controls in the guise of government negotiations for the Medicare drug benefit, coverage denials, and limits on access to new technologies.

As the 2008 election campaign moves toward its final stage, healthcare reform remains a high-profile issue. Both Democrat and Republican candidates have rolled out reform plans to expand access to healthcare through broader government programs plus tax breaks and incentives to help individuals obtain coverage. All these programs are costly and will require additional efforts to cut spending, prompting proposals for making the nation's healthcare system more efficient.

Jill Wechsler

The candidates envision large savings from adopting electronic medical records, encouraging prevention, and better coordinating care for patients with chronic conditions. These proposals, however, are likely to boost spending in the short run, prompting White House hopefuls to propose curbs on outlays for prescription drugs. A related strategy is to identify which therapies have sufficiently high value to warrant high price tags.

Sen. Barack Obama promises to provide Americans with access to the "exact same drugs in Europe and Canada" that pharmaceutical companies sell at half the price as in the US. He plans to save up to $30 billion by repealing the ban on government price negotiations for drugs purchased by Medicare and wants to increase the use of generic drugs by government health programs.

Similarly, Sen. Hillary Clinton promises to hold down fast-rising drug prices by removing barriers to generics competition, allowing Medicare to negotiate lower drug prices, and boosting oversight of drug advertising, "marketing excesses," and inappropriate financial relationships between manufacturers and providers. A major theme is to create a pathway for biogenerics competition—to end "the monopoly currently enjoyed by large biopharmaceutical companies" and thus save $5–7 billion each year.


While Democrats have long touted such tactics to curb drug prices, it's surprising to hear similar antipharma rhetoric from the presumptive Republican candidate, Sen. John McCain. He regards efforts to promote generics competition and to permit drug reimporting as compatible with his free-market approach to health reform. McCain wants to develop "routes for safe, cheaper generic versions" of drugs and biologics and "safety protocols that permit re-importation to keep competition vigorous."


In addition to attacking drug prices, health reformers want to steer spending to medical treatments and products demonstrating real-world effectiveness. Rising US healthcare spending is building support for more comparative effectiveness (CE) analysis of the quality and effectiveness of healthcare procedures and products. Such research promises to provide information that will help patients and their doctors choose the most appropriate care options, which ideally would include high-cost treatments that have data indicating higher benefits.

The Medicare Payment Advisory Commission (MedPAC) recommended in its June 2007 annual report that Congress establish an independent entity to sponsor "credible research on comparative effectiveness of healthcare services." In a January 2008 study, an Institute of Medicine (IOM) committee recommended establishing a national CE research program with "sufficient resources, authority, and capacity" to develop research standards and processes.

Not surprisingly, the presidential candidates have jumped on the CE bandwagon. McCain says that publicizing information on treatment options and developing national standards for measuring and recording outcomes can address rapidly rising healthcare costs. Clinton backs an independent "best practices" institute to provide better information on what works in healthcare and "how treatments compare to one another." Obama wants CE research on which drugs, devices, and procedures are the best for individual patients as one way to reduce the "considerable waste in our healthcare system."

Enthusiasm for CE research is boosting support in Congress for establishing a quasi-governmental effectiveness research organization. Senate Finance Committee chairman Max Baucus (D-MT) is looking to authorize such an entity as part of must-pass Medicare legislation needed to block a scheduled cut in payments to physicians. Some policymakers talk about expanding the CE program at the Agency for Health Research and Quality (AHRQ), which supports research to inform coverage and treatment decisions by Medicare and other government health programs.

The envisioned CE operation would be able to accept funding from private organizations and the federal government—an important consideration for raising the $200 million or so needed just to start such an operation. Any legislation adopted this year, however, is likely to establish only a placeholder to launch a CE program and not provide much more than the paltry $15 million that currently supports the AHRQ program.

Insurers and payers point out that the US is virtually alone among developed nations without an entity dedicated to comparing the effectiveness and value of new drugs, devices, and medical procedures. They look to the United Kingdom's National Institute for Health and Clinical Excellence (NICE) as a model for reviewing clinical and outcomes data to assess the added value of new medical technologies.


Instead of promoting high quality care, biotech manufacturers fear that CE analysis could be manipulated to support a cost-cutting agenda that blocks rapid acceptance of new treatments. A key factor driving the CE clamor is the emergence of new biotech therapies and medical diagnostics with the potential to improve public health and save lives, but at fairly high prices. While CE research could increase drug use and prevent inappropriate uses that raise safety issues, industry leaders maintain that payers should cover all medicines that the FDA deems safe and effective.

At an April briefing in Washington sponsored by the Alliance for Health Reform, David Nexon, senior vice president of the medical device association AdvaMed, raised concerns that CE research might be used to support a "cheapest is best" approach. CE studies are "rarely definitive slam dunks," he said, noting that one treatment often works better for certain patients than another one. A white paper issued by the Biotechnology Industry Organization (BIO) last year questions whether CE research methods are sufficiently developed to deal with the complexities of biotech therapies and the wide variation in individual response.

But the prospect that more effective (and limited) use of medical technology could save billions is too attractive for payers and insurers to ignore. "It makes no sense to us" to establish best treatment processes and then not look at that information in making coverage determinations, said Karen Ignagni, president of America's Health Insurance Plans (AHIP). While CE analysis might not lead an insurer to deny coverage, a health plan might put a more costly drug that lacks a clear advantage in a higher formulary tier, Ignagni noted. "But taking cost out of the equation is putting your head in the sand," she said.

Despite these differences, healthcare experts and pharmacoeconomic analysts are beginning to address operational and organizational policies for a CE research entity. Key issues are who will control and pay for the program, who will set the research agenda, what treatments will be evaluated, and how closely analysts will link CE research to payment policy. Biopharmaceutical companies are leery of a multibillion-dollar agency sponsoring comparative studies that Medicare and other payers would use in making product coverage and reimbursement decisions. And added study requirements could erect higher hurdles for bringing new drugs to market.

Consequently, the industry is encouraging health policymakers to look more broadly for strategies to rein in healthcare costs. Initiatives to reduce medical errors, curb hospital-acquired infections, adopt value-based purchasing, and implement IT systems have potential for reducing health system costs. In the end, the comparative research approach may be preferable to price controls in the guise of government negotiations for the Medicare drug benefit, coverage denials, and limits on access to new technologies.

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