Proposed spending cuts targeted at healthcare programs, such as Medicare and Medicaid, certainly will have an impact on healthcare providers and the healthcare system. Of particular concern for the pharmaceutical industry are proposed spending cuts in the prescription-drug benefit under Medicare Part D.

“It is extremely unfortunate that President Obama continues to push for a policy that could destabilize the successful Medicare Part D program and have a devastating effect on American jobs,” said Pharmaceutical Research and Manufacturers of America (PhRMA) Vice President Karl Uhlendor, in a PhRMA statement. “Government-imposed price controls in Part D could fundamentally alter the competitive nature of the program and threaten its success. Savings achieved in Part D are passed onto beneficiaries, contributing to the program’s success in holding costs far below projections, while achieving very high marks from seniors.”

PhRMA points to a recent PhRMA-funded report by the IMS Institute for Healthcare Informatics, which showed that on average costs for medicines in the top 10 therapeutic classes in Part D declined by more than a third between January 2006 and December 2010, from $1.50 to $1.00. IMS Institute projects that costs will continue to decline, reaching $0.65 by the end of 2015, representing a 57% decrease from 2006.

Also weighing in on the debate is the healthcare policy think tank, the Kaiser Foundation, which provided an updated side-by-side summary of changes to key Medicare provisions found in five major debt-reduction plans put forward by the White House, Congress, and independent, bipartisan commissions. The five plans, which were put forth at various times between Nov. 17, 2010 and July 19, 2011, are: the President’s Framework for Shared Prosperity and Shared Fiscal Responsibility; the House Concurrent Budget Resolution; the Senate “Gang of Six” Proposal; the National Commission on Fiscal Responsibility and Reform (Bowles-Simpson); and the Bipartisan Policy Center Debt Reduction Task Force (Domenici-Rivlin).

Whether these debt-reduction packages or others emerging from this week’s debate will make it through Congress in response to the pending debt-ceiling crisis is anyone’s guess at this point, but what is clear is that fiscal reform and its related impact on healthcare spending and drug-reimbursement levels will certainly affect the pharmaceutical industry. Whether the battle is here in the United States or abroad, national healthcare and drug-reimbursement policies affect the pharmaceutical industry.

Perhaps more important than short-term pricing effects, however, are potential influences on drug development. “Building a better mousetrap” is no longer a sufficient paradigm in drug innovation, which has to factor in the cost, pricing, and potential reimbursement of a drug. In tighter healthcare-spending environments, for example, will a new, more expensive drug for hypertension be reimbursed when an older, off-patent drug may be considered sufficient? How novel will a new drug have to be in order to be reimbursed by national governments or private insurers, and will it be worth the drug-development dollars to see? Does such an approach encourage a more sustainable healthcare environment or not? There are no easy answers for these questions, but what is clear is that drug reimbursement has become an important ingredient in drug development and commercialization.

See related blogs, “Could US Budget Woes Undo HIV Breakthroughs?”

The Accenture survey showed that of 68% of respondents that went online for health information, only about one in ten (11%) regularly turn to a pharmaceutical company’s website to seek information about an illness or medical condition; 92% go to other online resources. The study was based on Accenture’s online survey of 852 adult consumers in the United States between Aug. 30 and Sept. 3, 2010.

So what is a pharmaceutical company to do? “While pharmaceutical companies are methodical in manufacturing their products, there is a clear disconnect in how they communicate with patients,” said Tom Schwenger, global managing director for Accenture’s Life-Sciences Sales and Marketing Practice, in a company press release. Accenture says that pharmaceutical companies must not only provide the right information, but strategically upgrade their websites to create dynamic, interactive experiences; demonstrate a better understanding of patients’ needs; provide holistic solutions; and better reinforce their brand identities in a two-way dialogue.

Although using new media to execute a business strategy more effectively and improve customer relations is important, the larger concern facing the pharmaceutical industry, regulators, and the public at large is the overreliance of consumers on online resources that may not provide accurate medical information. Last year, the US Food and Drug Administration held public hearings to gain input from the public and other stakeholders as part of the agency’s evaluation of how the statutory provisions, regulations, and policies concerning advertising and promotional labeling should be applied to product-related information on the Internet and newer media technologies.

The Pharmaceutical Research and Manufacturers of America (PhRMA) weighed in on this debate by participating in those public meetings. Earlier this year, PhRMA detailed its proposal for regulation and standards for communication of online medical-product information. The proposal included three major recommendations, as outlined in a PhRMA’s March 9, 2010 press statement: the adoption of a universal symbol to indicate a direct link to FDA-regulated risk information online, the inclusion of introductory drug-warning information in sponsored search results and similar media with direct links to risk–benefit information, and the permission for drug companies to microblog newsworthy regulatory and scientific events for medical products.

It is to everyone’s advantage that online communication effectively provide medical information, including information about pharmaceuticals. Having the appropriate regulatory framework for reducing the spread of inaccurate information while facilitating its responsible dissemination is a difficult but important goal that pharmaceutical companies, regulatory authorities, consumers, and other stakeholders should seek to collectively meet. It will be important to watch how the PhRMA proposal and other suggestions will shape that course.

In 2005, Congress granted companies a big tax break that they hoped would create American jobs. The pharmaceutical industry took advantage of the opportunity to bring $100 billion in foreign profits back into the country. But instead of using the money to increase its workforce, the industry began cutting jobs. That year, drugmakers began laying off tens of thousands of American workers, according to a 2007 New York Times article. This would be a bad year for that history to repeat itself, given how many people already have lost jobs in the past year or so because of the poor economy. Still more layoffs are to come, as evidenced by Bristol-Myers Squibb’s (New York) announced plan to cut 3% of its workforce.

Some public officials want drugmakers to pay more in taxes, not less. Montana’s Governor Brian Schweitzer claims that the industry avoids paying its fair share by using complex tax-sheltering plans to shift income earned in the US to overseas locations. For example, Merck & Co. (Whitehouse Station, NJ) transferred patents to a subsidiary in Bermuda, then paid that subsidiary tax-deductible royalties for those patents. In February 2007, Merck finally had to pay a $2.3-billion settlement to the Internal Revenue Service for this practice, according to the Los Angeles Times.

I’m not inclined to agree with drugmakers that the R&D tax credit should be made permanent. History has shown that the change would not necessarily create jobs, and I don’t think the favor is justified in light of many companies’ tax-ducking schemes. Making the R&D tax credit permanent would not be the right solution for the industry, the government, or patients. Let’s try to think of other ways to create jobs and spur innovation.

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.

The Pharmaceutical Research and Manufacturers of America (PhRMA) objected to Maine’s bill, arguing that the levels of pharmaceuticals found in water supplies and landfills are too small to pose a risk. PhRMA may be right that the levels of drugs are too small to pose risks to humans, but the Environmental Protection Agency (EPA) is concerned that the drugs may harm fish and other aquatic life. I’m glad that EPA is studying this question. I believe that if we harm our ecosystem, we can’t help harming ourselves.

Besides, we have a precedent for asking the pharmaceutical industry to help dispose of unused and potentially toxic products. After the public realized that toxins could leach from electronic components and potentially poison the environment, 19 states passed legislation requiring electronics manufacturers to help pay for these components to be recycled. Maine just updated its electronics recycling law last spring.

I think the general shape of Maine’s drug take-back bill is positive, and I’d like to see it become law. Pharmaceutical manufacturers know the most about the medicines that they create, and I think the idea that they should help dispose of the products should be noncontroversial. In fact, PhRMA would score points with the public and establish its green credentials by supporting bills such as Maine’s. Our environment and our health would both benefit.

PhRMA issued a statement and held a conference call with the media on Mar. 9 to explain the association’s position, which includes support of further guidance from FDA on how drug companies can use the Internet and social media. “PhRMA is proposing that the Food and Drug Administration issue new guidance detailing how biopharmaceutical research companies may use social media to help patients and to improve public health; the guidance eventually could be adopted as regulations,” said PhRMA Senior Vice-President David E. Wheadon in the statement. “… At a time when more than half of adults first turn to the Internet to find health information, the extraordinary volume of dangerous and inaccurate information about medicines on the Web makes the FDA’s leadership on this topic all the more essential.”

PhRMA detailed its proposal to FDA in a 16-page letter dated Feb. 26, 2010. The proposal includes three major recommendations, as outlined in PhRMA’s press statement: the adoption of a universal symbol to indicate a direct link to FDA-regulated risk information online; the allowance of introductory drug-warning information in sponsored search results and similar media with direct links to risk–benefit information; and permitting drug companies to microblog newsworthy regulatory and scientific events for medical products.

PhRMA is seeking the adoption of a universal symbol that could be used in space-constrained media to indicate a direct link to FDA-regulated risk and benefit information. “The use of the FDA’s own logo or other FDA-approved symbol would shine a brighter spotlight on official Web sites of FDA-approved medical products containing reliable and comprehensive information and medicines’ benefits and risks,” said PhRMA in its statement.

PhRMA is also seeking to have introductory warning information in sponsored search results and similar media with direct links to comprehensive risk and benefit information. “The FDA should allow manufacturers to present brief introductions to health information in electronic formats, just as the FDA now does it own tweets,” said PhRMA in its statement. PhRMA recommended that postings in space-constrained media such as sponsored search results would include a standard universal warning that would be approved by FDA such as: “All drugs have risks. Click here for more information from the manufacturer.” The link would then take consumers to more product-specific risk and benefit information.

PhRMA also is looking for FDA to adopt standards for microblogging as done through social media sites such as Twitter, a communication tool that the industry wants to be able to use more fully once appropriate standards are specified. “Given space constraints and consistent with FDA’s own use of such media, the Agency should allow biopharmaceutical manufacturers to serve as responsible stewards of newsworthy information about their products and should permit manufacturers to microblog about significant scientific and regulatory events,” said PhRMA in its statement, emphasizing that such exchange of scientific information should not be advertising-related or promotional.

In expanding its use of online information tools, PhRMA is also seeking protection against erroneous, inaccurate, or misleading content about a company’s products. PhRMA is proposing that a biopharmaceutical manufacturer only be accountable for a website or other content that it controls (i.e., as the manufacturer or through it agents), for which it can add or delete content, or which is funded by the manufacturer or its agents.

PhRMA’s proposals are reasonable and are a good step forward to close a large gap in current federal regulation for online health information. Such standards would at least set a framework of regulation that would recognize the need to keep pace with the fast-changing development and adoption of newer media technologies and tools.

The adoption of these proposals or other standards, however, leads to an equally difficult issue: enforcement. How FDA, other federal agencies such as the Federal Trade Commission, search-engine companies, media companies, drug companies, and other stakeholders tackle the jurisdictional, administrative and operational tasks and responsibilities for effective enforcement, including ways to fund increased regulatory oversight, are additional challenges that will need to be addressed as FDA considers this issue.

There is not a simple answer to that question as both the innovator-drug industry and the generic-drug industry are taking decidedly different positions. So far, the innovator-drug industry as a whole is offering a measured view of the Senate proposal. On Nov. 19, the Pharmaceutical Research and Manufacturers of America (PhRMA) Senior Vice-President Ken Johnson released a statement in the wake of the Senate’s decision to proceed with debate. “While we are still reviewing the Senate bill, we remain committed to do our part to make comprehensive healthcare reform a reality this year,” he said in the statement. “We believe that all Americans should have access to high-quality, affordable healthcare coverage and services. If done in a smart way, healthcare reform will benefit patients, the economy, and the future of America. Compared to the House bill, which would have a chilling effect on medical progress in America, the Senate approach provides a much better blueprint for reform.”

PhRMA has supported healthcare reform, offering an $80-billion commitment over 10 years to close gaps in Medicare prescription drug coverage. It, however, objected to measures in the recently passed House bill, which would impose mandatory rebates in Medicare Part D coverage. “PhRMA and its member companies share the goal of closing the Medicare Part D coverage gap for affected seniors and have agreed to provide a 50% discount on brand-name medicines purchased in the so-called ‘doughnut hole,’ said PhRMA in an Oct. 29, 2009 press release. “However, the Congressional Budget Office has warned that the House bill, which imposes mandatory rebates in Part D, would ultimately lead to a 20% increase in Part D premiums paid by beneficiaries.”

In offering a more supportive position toward the Senate provision, PhRMA says that it remains committed to working with parties to get a healthcare measure passed this year. “What’s critical now is that we remain focused on the important goal of helping pass a comprehensive health care reform bill that can get to the President’s desk this year. We will continue to be a constructive partner to help meet this goal,” said Johnson in the statement.

Meanwhile, the generic-drug industry is voicing disagreement with the Senate bill. Generic Pharmaceutical Association (GPhA) President and CEO Kathleen Jaeger sharply criticized the biologics provision of the Senate healthcare reform proposal. “Just when you think the pro-BIO and PhRMA provisions in healthcare reform couldn’t get any more favorable for them, the Senate healthcare reform bill has further disappointed consumers by adding additional monopoly protection to expensive biologic medicines,” she said in a Nov. 19 statement. “Regardless of the motivation, the biologic provision in this bill takes the already egregious and unwarranted 12 years of exclusivity and extends it. The Senate leadership had the opportunity to address the deficiencies of the House HCR [healthcare reform] bill and to fulfill the Senate HELP [Health, Education, Labor and Pension] Committee’s commitment to close down a major loophole known as ‘evergreening’ and deliver a more reasonable biogenerics pathway to consumers, labor, businesses, generic manufacturers, and employers. Instead, they have provided further hurdles to access more affordable medicines.”

No doubt both the innovator-drug and generic-drug industries will be participants among the many interests in the massive upcoming discourse on healthcare reform. To put it succinctly, let the debates begin.

The study, A decade of Controversy: Balancing Policy with Evidence in the Regulation of Prescription Drug Advertising, explained that viewers of American television see as much as 16 hours of prescription drug advertisements every year. Living in the EU where DTCA for prescription drugs is banned, I have to say I was a little shocked at the number!

So what is it that the authors of the study dislike? First of all, it’s important to point out that the authors are not completely opposed to DTCA; on the contrary, they admit that it offers benefits. However, they also believe that improvements can be made to “minimize potential harm and maximize benefits”.

The authors concluded that the majority of prescription drug advertisements “fail to provide enough information to allow consumers to clearly identify whether the advertised drug is right for them”. They also added that the “over dramatization and emotional portrayal” of a drug’s benefits in advertisements can also be misleading.

As a solution, the authors proposed several guidelines: advertisements should help consumers identify whether the treatment is right for them; advertisements should provide accurate and specific information about the potential benefits of advertised drugs, and should state how the drug compares to placebo or other available treatments including generic drugs; and specific information should be provided regarding the potential risks associated with drugs without other visual or audio distractions.

This isn’t the first time DTCA has been in the spotlight. In 2008, the Government Accountability Office (GAO) published a report that called on the FDA to boost its enforcement of DTCA rules, while in 2009 voluntary Guiding Principles for DTCA laid down by the Pharmaceutical Research and Manufacturers of America (PhRMA) came into effect. Several members of US Congress, including Henry Waxman, have also called for changes to the FDA’s regulation of DTCA

As I mentioned before, DTCA in the EU is banned, but there have been moves by regulatory authorities to stick a toe into the DTCA pool. Earlier this year, Pharmaceutical Technology Europe reported on a proposal by the European Commission that would allow drugmakers to disseminate certain information on prescription drugs directly to European patients. The ban on DTCA would remain in place, but drugmakers would be able to provide factual, non-promotional information about the benefits and risks of their medicines using certain media (excluding television and radio).  This could offer a compromise between allowing the pharma industry to advertise its products while avoiding the problems with DTCA highlighted in the study in the American Journal of Public Health.

In a press statement, the lead author of the study, Dominick L. Frosch, pointed out that: “If the pharmaceutical industry isn’t willing to change the ads to make them more useful to consumers, Congress should consider passing legislation that will regulate the ads to improve the information provided in order to help patients make more informed choices.”

The Pharmaceutical Research and Manufacturers of America (PhRMA) issued a statement this week supportive of such efforts and suggested the use of an FDA logo to identify online information that is FDA-regulated health communication. “PhRMA looks forward to working with the Food and Drug Administration and diverse stakeholders to identify ways in which our member companies may continue to communicate about their medicines online in truthful, scientifically accurate, and nonmisleading ways,” said PhRMA Senior Vice-President Ken Johnson in the statement. “Given the unprecedented growth of the Internet as a source of health information, the FDA should facilitate the appropriate use of online media by America’s pharmaceutical research and biotechnology companies to provide FDA-regulated information on medicines. “

Johnson points out that other federal entities such as the White House, the Centers for Disease Control and Prevention, and FDA use new media devices such as blogs and Twitter. “Going forward, the agency [FDA] could promote the responsible use of the Internet to benefit patients by shining a brighter spotlight on legitimate, FDA-regulated health communication,” he said. “One way the FDA could accomplish that aim would be to adopt a single, easily recognizable logo to help guide patients and healthcare providers to FDA-regulated information about medical products, including manufacturer websites. Leveraging the FDA’s logo—or a universal FDA-approved graphic symbol—in search results and throughout the Web would inform patients, at a glance, that they are visiting a legitimate site that contains comprehensive FDA-regulated benefit and risk information. Such a graphic symbol could be combined with a universal warning statement to provide an indication of risk when there is little space (e.g., a search result or tweet).”

In a preview of the testimony that it will be providing, PhRMA held a briefing with the media. The association said that its recommendations for FDA fall into three broad categories: patient safety, access protection, and accountability. “The FDA should sign a brighter spotlight on legitimate FDA-regulated health communication to help further mitigate the very real public-health threats posed by unregulated, illegal Internet drugs sales. Our proposal for an FDA-authorized universal symbol speaks to this,” said Jeffrey Francer, PhRMA’s assistant general counsel. “…Any FDA regulations must enhance, not detract from, a style of communication that has helped to improve patient health by taking into account the unique characteristic of the medium, for example, limited space and the unique design parameters of search,” he said. He added that “the proposed FDA regulatory framework should reflect a balanced approach to manufacturer accountability. Pharmaceutical companies control their own sites, their own agents, and their employees, but there is no sensible basis to hold manufacturers responsible for third-party statements, such as statements that the manufacturer did not cause or cannot control.”

PhRMA also pointed to the need for oversight considering increased consumer use of the Internet for health and drug information. Lori Reilly, vice-president for policy and research at PhRMA, cited a recent Pew Research Center survey that found that 83% of Internet users look online for health information, and 45% of Internet users research drug information—either prescription or over-the-counter drugs, up from 34% in 2002.

In addition to the public hearing, FDA is accepting written comments on the matter until February 28, 2010. Such efforts are a first good step in evaluating how to safeguard the use of Web-based health and drug information.

At first blush, it looks like drugmakers took a beating. The New York Times said that the drug industry receives “harsh treatment” in the bill. In June 2009, President Obama and the Pharmaceutical Research and Manufacturers of America (PhRMA) agreed that the industry would provide $80 billion in rebates and discounts on branded pharmaceuticals over 10 years. The House bill would require drugmakers to provide another $60 billion in rebates over the same period, making a total of $140 billion in concessions.

These rebates might have been what Ken Johnson, PhRMA’s senior vice-president, had in mind when he said in a press release that the House bill would kill tens of thousands of jobs in the pharmaceutical industry. Yet the additional rebates might not be included in the healthcare-reform bill that the Senate eventually passes.

The House bill also would enable the government to negotiate the prices that Medicare pays for drugs, a policy that the industry has so far opposed. On the other hand, the bill would not allow Medicare to create a formulary. This omission essentially vitiates Medicare’s price-negotiating power, said Steven D. Findlay, senior health-policy analyst of Consumers Union, in the New York Times article.

Ultimately, I think it’s too soon to draw conclusions about what healthcare-reform legislation will mean for the pharmaceutical industry. The Senate has yet to pass its own version of the bill. The Senate bill might not, for example, require the additional rebates from the industry that the House bill does. It might, as the House bill does, give biologics protection from generic competition for 12 years. And after the Senate passes its bill, it will have to be reconciled with the House bill.

Despite its initial alarm, PhRMA seems determined to withhold its judgment. “This is a three-act play, and a good critic doesn’t write a review after the opening scenes,” said Johnson in the press release. Time will tell what shape the final legislation takes. It is at least conceivable that the industry could gain from healthcare reform. The law that Obama finally signs could expand the industry’s market, increase drug sales, and provide incentives for innovation.