Transformation to Characterize 2013 - Pharmaceutical Executive


Transformation to Characterize 2013

Pharmaceutical Executive

Costs and coverage

As deficit reduction talks continue, pharmaceutical companies are steeling themselves for a wave of proposals to cut healthcare expenditures by reducing reimbursement for providers and slowing spending on prescription drugs. Three years ago, industry supported health reform and its promise to extend coverage to millions of individuals through insurance exchanges and expanded Medicaid programs. Manufacturers agreed to pay billions in fees, higher Medicaid rebates and part of the cost of closing the Part D coverage gap in return for expanded drug access and a market-based Medicare drug program.

Now pharma faces policies that would tighten utilization controls on high-cost specialty drugs and demand more fees and rebates. The White House has proposed to reduce exclusivity on brand name biologics from 12 to seven years, rejecting the timeframe negotiated for the biosimilar program. And the administration backs a prohibition on pay-for-delay generic-brand deals as another way to save money. There's enthusiasm for comparative effectiveness research, moreover, to direct coverage to more effective and less costly treatments.

A top priority for pharma thus is to head off added rebates on Part D plans, specifically on the drugs used by "dual eligible" seniors who qualify for both Medicaid and Medicare benefits. Drug marketers did as well as they could have expected when HHS ruled in November that health plans marketed through exchanges should provide coverage for more than one drug per class to meet "essential health benefit" (EHB) requirements. In fact, most states will adopt "benchmark" plans that cover many more drugs, especially those with open formularies that list more than 1,000 medicines.

But it's unlikely that pharma can squash a Medicare rebate completely in this budget-cutting climate where added fees on drug companies look pretty attractive to alternative cost-cutting actions, such as raising the Medicare eligibility age or limiting Medicaid coverage. If pharma doesn't want to get hit by a $100 billion bill for new rebates and other fees, industry will need to bring alternative proposals to the table in the coming months.

Jill Wechsler is Pharmaceutical Executive's Washington correspondent. She can be reached at


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