The legislative battle for healthcare reform ended on Thursday night Mar. 25 following the passage by both houses of Congress of a slightly amended version of “The Healthcare and Education Reconciliation Act” (HR 4872), the so-called “fixer bill” to the “Patient Protection and Affordable Care Act” (HR 3590), the healthcare reform legislation that was passed by the US House of Representatives on Sunday Mar. 21 and signed into law (Public Law No,111-148) by President Barack Obama on Tuesday Mar. 23. The reconciliation legislation (HR 4872) now goes to the President for his signature, which would clear the last hurdle for healthcare reform after a grueling week of intense debate and parliamentary efforts to both advance and stop final passage. The debate on the myriad of measures in the healthcare reform package will no doubt continue, but as the dust settles, at least momentarily, what are some of the implications for the pharmaceutical and biotechnology industries?
As reported earlier this week in ePT, Pharmaceutical Technology’s weekly electronic newsletter, the Pharmaceutical Research and Manufacturers of America (PhRMA), the Biotechnology Industry Organization (BIO), and the Generic Pharmaceutical Association (GPhA), all issued press statements on the passage of healthcare reform. In general, the pharmaceutical and biotechnology industries have largely supported healthcare reform as a means to expand healthcare insurance coverage. Specific provisions, however, are receiving mixed reactions. The newly passed legislation, which sets different timelines for implementation of the multitude of measures, brings to life again the division between the innovator-drug and generic-drug industries on the regulatory requirements for biosimilars, raises concerns about the establishment of an independent review board evaluating Medicare, sets new fees on the pharmaceutical industry, but also provides measures to support drug development.
Title VII, “Biologics Price Competition and Innovation,” of HR 3590, which was signed into law earlier this week, establishes a regulatory pathway for biosimilars, which includes 12 years of data exclusivity for a biological reference product. The length of time for data exclusivity has been an area of contention between innovator-drug companies, which favored the longer period of data exclusivity, and the generic-drug industry, which advocated for a shorter time frame. With regard to the newly passed healthcare legislation, BIO supported the measures that created the regulatory pathway to biosimilars, saying “the language establishes equity with Hatch-Waxman regime,” which is the statutory framework for traditional generic drugs.
GPhA President and CEO Kathleen Jaeger, however, while acknowledging the legislation provides authority for FDA to establish a regulatory pathway for biosimilars, criticized the legislation for failing to close the so-called “evergreen loophole,” which refers to the various ways in which innovator-drug companies can extend market exclusivity for a branded drug through strategies such as authorized generics. “Until the brand evergreen loophole is closed and the indefinite brand biologic monopolies are addressed, our healthcare system will not see true savings from biogenerics for decades,” she said.
Drug pricing, always an important concern for the pharmaceutical industry, was also addressed in the newly passed healthcare reform legislation. The new law closes the so-called “doughnut hole,” or a gap in Medicare coverage for prescription drugs. During the healthcare debate, the pharmaceutical industry, through PhRMA, had made a policy commitment of $80 billion during 10 years, under which pharmaceutical companies would provide discounts for brand-name prescription drugs to close the coverage cap. According to a summary analysis by the House of Representatives, under the law, beginning in 2010, Medicare beneficiaries who go into the doughnut hole will receive a $250 rebate. After that, they will receive a pharmaceutical manufacturers’ 50% discount on brand-name drugs, increasing to 75% on brand-name and generic drugs to close the doughnut hole by 2020.
Although the closure of the doughnut hole was supported by PhMRA, the association raised concerns about a measure that would establish a 15-member Independent Payment Advisory board in charge of evaluating Medicare costs. According to a timeline analysis provided by the House of Representatives, the board would develop and submit proposals to Congress and the private sector aimed at extending the solvency of Medicare, lowering healthcare costs, improving health outcomes, and improving quality and efficiency. The recommendations and reductions would become law unless alternative recommendations are passed by Congress. In a statement, PhRMA said it had concerns with such a board that could “enact sweeping Medicare changes without action by Congress and would not be subject to judicial or administrative review,” and pledged to work with Congress to address these concerns.
The new law also imposes additional fees on the pharmaceutical industry. According to the House analysis, the new law imposes an annual, nondeductible fee on the pharmaceutical manufacturing industry allocated according to market share. The measure does not apply to companies of branded pharmaceuticals with sales of $5 million or less.
The new law also contains certain measures that would seemingly support drug development. It provides for a two-year temporary credit, subject to a $1-billion cap, to encourage investment in new therapies to prevent, diagnose, and treat acute and chronic diseases, according to the House analysis. The credit would be available for qualifying investments made in 2009 and 2010. Also, the law prohibits new health plans from dropping coverage because an individual chooses to participate in a clinical trial and from denying coverage for routine care that would otherwise be provided because an individual is enrolled in a clinical trial, according to the House analysis. The measure applies to all clinical trials that treat cancer of other life-threatening diseases.
So what is next? The overarching issue in the upcoming months will be to see whether the new healthcare package will hold and to what extent the numerous private and public interests will be able to rescind, modify, or fortify measures in the healthcare reform package. There is no easy or certain answer as to how this process will unfold, but it is clear that the debate on healthcare reform will stay in the fore of US public policy.