Manufacturers aren't complaining too loudly about the new costs because they gain an attractive pathway for the Food and Drug
Administration to authorize follow-on biologics (FOBs). Despite strong opposition from powerful legislators and the White
House, innovator firms won a record 12-year data-exclusivity period for reference biotech products, with a possible six-month
extension for sponsors that conduct pediatric studies. The Congressional Budget Office says the program will save the government—and
cost manufacturers—$7 billion over ten years. But generics makers counter that the gains could have been over $50 billion,
and that this is just a big giveaway to Big Pharma.
All manufacturers could benefit from clarity for developing and marketing "biosimilars" and "biobetters." FDA now has the
task of issuing guidance on what assays and clinical studies will be needed to document FOB safety, purity, and potency, as
well as what criteria could support product interchangeability—a critical issue for marketing and reimbursement. Sponsors
will pay FDA user fees; there's a process for innovators to challenge patent infringement; and Medicare Part B will pay for
biosimilars at average sales price plus 6 percent—an amount considered high enough to encourage physician prescribing of less
Another plus for industry is language limiting use of comparative effectiveness research (CER) sponsored by the new non-government
Patient-Centered Outcomes Research Institute. The legislation rules out using quality-adjusted life years (QALY) to establish
cost-effectiveness, a specific that distinguishes this program from the United Kingdom's National Institute for Health and
Clinical Excellence (NICE). CER data alone can't support government coverage or reimbursement decisions, studies have to recognize
differences in patient populations, and all information has to be made public. Funding for the new entity starts small, but
increases to $150 million in 2012 and subsequent years by tapping into the Medicare trust fund and collecting fees from insurance
companies. The Institute will form a governing board this September, including at least one pharma representative, and will
issue methodology guidelines next year.
More Transparency, Oversight
At the same time, reform creates new headaches for pharma. Beginning in 2013, "sunshine" provisions will require national
disclosure of industry payments to physicians, plus submission of detailed data on drug sample distribution. Physician payment
information will be made public, and there will be hefty fines for noncompliance. Federal pre-emption of state transparency
laws is fuzzy.
Pharmacy benefit managers also have to report to HHS on drug rebates and discounts as well as generic drug dispensing rates
for Medicare drug plans. These reports, will be kept confidential, but will be available to Medicare analysts and Congress
to help shape payment policies.
Looming on the horizon is a new Independent Medicare Advisory Board that will propose ways to slow the growth in Medicare
spending. PhRMA has raised concerns about the broad powers of this entity, noting that it could institute "sweeping Medicare
changes" affecting Part D reimbursement without legislative review. The board won't be up and running until 2014, which allows
time for industry to press for modifications to its charter. Policymakers might choose not to kill the board, as they are
anxious to gain any and all savings from healthcare providers.
The new law does very little to "bend the cost curve" on the nation's healthcare system. Instead, it pays for expanded coverage
and other reforms through cuts in Medicare provider fees, which Congress often rescinds, and by taxes on high-income consumers
and health care companies, which traditionally don't cut costs.
One sticking point for pharma is that the higher rebates and discounts go into effect right away, while most of the features
that expand coverage won't kick in till 2014. It will take some time before anyone can determine if added revenues do offset
added costs for drug makers.