Washington Editor

WASHINGTON - Medicare legislation headed to the White House contains a few less publicized provisions that change the law, for better or worse, on certain issues dear to the biotechnology and pharmaceutical industries.

But overall, drug lobbyists in Washington appear supportive of pending Medicare reform, which made it through the Senate in a 54-44 vote, and the House in a 220-215 vote. Indeed, the Biotechnology Industry Organization and the Pharmaceutical Research and Manufacturers of America, both based in Washington, issued prepared statements praising the final bill.

Carl Feldbaum, BIO's president, said, "Although the new program is slated to take effect in 2006, many of the legislation's provisions will have a near-term impact. Three months after enactment, the Medicare program will launch a $500 million demonstration project covering oral cancer drugs and self-injectable biotech products for rheumatoid arthritis and multiple sclerosis. Until now, Medicare never covered these medicines."

And PhRMA's president, Alan Holmer, said, "We applaud Congress for producing this landmark bipartisan legislation that improves patients' access to quality, affordable medical care."

Nevertheless, senior citizens, and for that matter, ordinary Americans looking for more affordable prescriptions, aren't likely to get them from Canada.

A compromised version of the drug reimportation bill, similar to what was approved under the Clinton administration, remains in the legislation. The version allows Americans to reimport FDA-approved prescription drugs from Canada if the Secretary of Health and Human Services certifies that it is safe. Donna Shalala, the HHS secretary under Clinton, refused to certify that such a practice was safe, and now the decision lies in the hands of Tommy Thompson.

The newly approved reimportation provision cuts out a few elements sought by its authors, Rep. Gil Gutknecht (R-Minn.) and Jo Ann Emerson (R-Mo.). Specifically, they were angling for Americans to have the option of bringing in FDA-approved drugs from countries like Australia, Canada, Iceland, Japan, Liechtenstein, New Zealand, Norway, Switzerland, South Africa and the European Union. That version did not require Thompson's certification. (See BioWorld Today, July 28, 2003, and Oct. 27, 2003.)

"All along, this law has not applied to biologics, and they never breached that, which is good news," Sharon Cohen, BIO's vice president of government relations, told BioWorld Today. "We think it is bad public health policy to open the borders anyway, but the good news is they did not go down a path of opening this up to biologics."

So, if Americans can't buy cheaper drugs from the far corners of the earth, they may look toward generics as a way of saving money.

The Generic Pharmaceutical Association (GPhA), the Washington-based generic drug lobby, also issued a statement applauding the final Senate passage, referring to the strong generic access provisions as a victory.

"The generic access provisions of this legislation will close certain loopholes that have unnecessarily delayed the timely introduction of generic drugs and solidify the incentive for generic challenges of weak or invalid patents," Kathleen Jaeger, GPhA's president and CEO, said in a prepared statement.

Specifically, Jaeger is making reference to language dealing with the Hatch-Waxman Act of 1984, legislation that created the generic drug industry.

The final Senate bill stops brand-name or innovator companies from "stacking" multiple 30-month extensions on patents, which prevent generic companies from introducing drugs to the market.

While the drug industry believes that such instances of stacking are rare, many lawmakers and supporters of the generic industry have long argued that large brand-name companies have exploited that weakness in the law.

Meanwhile, the industry didn't lose out completely on the contentious issues surrounding reimbursement rates for drugs and biologics used in the outpatient hospital setting.

Medicare reimbursement is based on an average wholesale price (AWP), believed to be arbitrary by some government officials. In a Senate hearing early last year, Thomas Scully, administrator of the Centers for Medicare and Medicaid Services, said AWPs (prices set by companies) are often exorbitant. (See BioWorld Today, Jan. 31, 2003.)

The legislation takes up changes to the AWP reimbursement rates pertaining to physicians' offices, which Cohen said often are used as benchmarks for reimbursement in the outpatient prospective payment system.

And as the pending legislation stands now, in 2004 the government will reimburse drugs administered in a physician's office at 85 percent of the AWP (currently the rate is 95 percent). In 2005 and 2006, the government will implement the new system of either competitive bidding or average sales price plus 6 percent.

During 2005 and 2006, the General Accounting Office will develop a new system for drug acquisition.

The legislation also prevents CMS from setting prices on certain drugs and biologics by classifying them as "functionally equivalent." Since that is not retroactive, it will not impact reimbursement of Procrit (Ortho Biotech Products LP, of New Brunswick, N.J.) or Aranesp (Amgen Inc., of Thousand Oaks, Calif.), two anemia drugs deemed equivalent by CMS despite objections by Amgen. (See BioWorld Today, Nov. 4, 2002, and Dec. 27, 2002.)