Congress Moves to Cut Pharma Costs

Legislators push bills supporting generics and imports, while manufacturers challenge state initiatives in court.
Aug 31, 2002

The Senate's failure to approve a Medicare pharmacy benefit in August was not a big surprise on Capitol Hill, but it was disappointing to policy makers on all sides. Instead, the legislators adopted measures designed to make pharmaceuticals more affordable for all consumers. The lead bill revises patent law in an effort to bring generic therapies to market more quickly. Key amendments would permit the import of cheaper medicines from Canada and also allow states to adopt new cost-cutting strategies as part of their efforts to expand state pharmacy benefit programs. Debate on those issues will continue this fall as Democrats push for the House to approve a similar generic reform measure and Republicans press for compromise on Medicare pharmacy coverage.

In Support of Generics After failing to agree on a Medicare Rx benefit, the Senate approved generic reform legislation by a wide margin (78–21). The bill (S. 812) makes significant changes in the Waxman-Hatch Act of 1984. The measure aims to lower medicine costs by preventing innovators from using patent policies and regulatory procedures to block generic competition. The bill allows only one 30-month patent extension for brand-name manufacturers that file lawsuits against generic firms for alleged patent infringement. The measure also allows generics makers to file suits challenging "inappropriate" patent listings in FDA's Orange Book. Another controversial provision grants FDA authority to revise bioequivalence standards for generics, which the industry says could open the door to approval of non-traditional (biotech) generic products.

Across the Border The Senate leadership also used the generic reform bill as a vehicle for debate on other prescription cost-cutting proposals, leading to approval of a bill designed to provide consumers with access to imported medicines. The bill, sponsored by Senator Byron Dorgan (D, North Dakota) and many border state legislators, allows individuals, pharmacists, and wholesalers to import FDA-approved drugs from Canada. During floor debate, though, the Senate added a provision that allows FDA to kill the program if it considers the policy unworkable.

FDA officials have repeatedly claimed that any expansion of imports would let a flood of unregulated and unsafe medical products into the United States-a scenario aggravated by fears of a bioterrorism attack. The agency aired its concerns about drug importation at a July hearing before the Senate Special Committee on Aging. FDA senior associate commissioner Bill Hubbard said the proposed legislation would "severely damage" FDA's regulatory system, noting that the federal government already faces a massive task checking for illegal drug imports at the nation's ports and through the mail. Panel chairman Senator John Breaux (D, Louisiana) linked import proposals to the rising tide of drug counterfeiting, which has generated 16 new cases and 12 arrests by FDA so far this year. The agency and manufacturers have found counterfeit versions of Serono Laboratories' Serostim (somatropin); vials of Amgen's Neupogen (filgrastim) that contained only saline solution and had erroneous lot numbers and incorrect expiration dates; counterfeit versions of Amgen's Epogen (epoetin alfa) with only one-twentieth of the necessary active ingredient; and widespread counterfeiting of Pfizer's Viagra (sildenafil).

FDA is upgrading its computer data systems to obtain better information on product imports and is looking at new technologies, such as x-ray devices, that may help law-enforcement officials deal with the rising volume of illegal imports. The Senate amendment to the Dorgan bill requires the Department of Health and Human Services (HHS) to "certify" that drug importation "will be safe and provide consumers with significant savings," but FDA is unlikely to make such a finding any time soon.

Growing Challenges The possibility of gaining support from the Supreme Court in challenging state cost-cutting initiatives provides a small glimmer of light in an increasingly murky legal situation for pharma companies. Consumer groups are filing more class action suits, and state prosecutors are bringing more cases that challenge pricing practices. In June, a coalition of 29 state attorneys general filed an antitrust suit against Bristol-Myers Squibb, claiming that BMS' efforts to extend patents on the cancer drug Taxol (paclitaxel) were intended to keep generic products off the market, thus forcing patients and states to spend more on the therapy than they should have.

A group of more than 30 state attorneys general have formed a task force to discuss additional legal actions against pharma companies. The group is examining patent issues, manipulation of average wholesale prices, and other market activities that could be regarded as strategies to maintain or raise product prices.