New Ballgame in Washington

Dec 01, 2010

Jill Wechsler
The Republican wave that swept many long-standing Democrats out of Congress and state houses last month raises new challenges for pharma. While the slow pace of economic recovery and continued high unemployment were the top issues stirring voter discontent, healthcare reform emerged as a deciding factor as unhappy Americans went to the polls.

With new leaders controlling the House of Representatives, and Democrats holding a narrower majority in the Senate, Republicans will be looking to deliver on promises to cut government spending and to repeal or revise Obamacare. That will not be an easy task, as many provisions of the Affordable Care Act (ACA) are highly popular, such as closing the donut hole in the Medicare drug benefit and requiring insurers to cover patients with pre-existing conditions and drop lifetime limits. There's broad support for approving similar versions of biotech therapies that will be more affordable for patients, and the authorizing legislation was championed by consumers and pharma companies alike (see "Pipeline Report").

Taking it to Court
To satisfy candidates who ran successfully against Obamacare, the new House leaders are talking about a vote to repeal health reform early next year. This will be largely a symbolic gesture because it's unlikely to pass the Senate or override Obama's veto pen. Drug companies and insurers are anxious to retain the individual mandate in order to extend coverage to the 30 million uninsured; without some penalty for being uninsured, consumers will wait until they are sick to purchase health insurance, and premiums will soar. The worst-case scenario for biopharmaceutical manufacturers is that the promised expansion in healthcare coverage evaporates, leaving companies with added fees and rebates, and uncertainty about reimbursement for new therapies that take years and millions of dollars to develop.

Cuts and revisions

Instead of wholesale repeal of the ACA, the new Congress will be looking to challenge specific provisions in the bill. Medical product makers and insurers would like to roll back the billions in added taxes imposed on them to help finance expanded coverage. Republicans also may move to block new regulations before they go into effect, while they promote medical malpractice reform to protect doctors who follow "best practice" guidelines. One piece of low-hanging fruit that even President Obama agrees should be modified is a cumbersome tax-reporting provision that requires businesses to file 1099 forms with the IRS for payments for goods and services worth more than $600 during the year.

A prime target for the axe for pharma and providers is the Independent Payment Advisory Board (IPAB), which has broad powers to set payment policy for Medicare and to recommend changes in private-sector payment systems. Doctors and hospitals are leery of IPAB's authority to implement rate cuts, and drug manufacturers fear the Board will propose lower acquisition costs of drugs—particularly high-cost therapies—without weighing how these treatments can help lower healthcare costs overall. At the Mid-Atlantic Biotechnology Industry Organization (BIO) conference last month, John Castellani, president of the Pharmaceutical Research and Manufacturers of America (PhRMA) since September, acknowledged concern about the board's "sweeping powers" to revise Medicare payment policies without any outside legal review. Congress is supposed to start funding IPAB in 2012 so that it can be up and running in 2014, but that may not happen.

PhRMA members hope that Republicans will be responsive to industry concerns about excessive regulation and threats to innovation, but some GOP leaders still resent industry's support for health reform. Last year, Rep. John Boehner (R-Ohio), who is slated to be the next Speaker of the House, blasted PhRMA for its deal with the White House to ante up some $80 billion in higher Medicaid drug rebates and donut hole subsidies, in return for administration help in opposing drug reimportation and government price negotiation.

With the anti-health-reform rhetoric heating up in recent months, manufacturers have moved to rebuild their traditional ties to Republicans. A top priority for PhRMA and BIO in the coming year is to gain renewal of the Prescription Drug User Fee Act (PDUFA). Republicans traditionally have been less concerned than Democrats that user fees make the Food and Drug Administration (FDA) too dependent on industry. However, the new powers on Capitol Hill may want to hike the fees to offset reductions in government appropriations.

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