After a year of consultation with all parties, regulators and manufacturers reached agreement for renewing the Prescription Drug User Fee Act (PDUFA) this past spring, on track to transmit the plan to Congress next January. The current user fee program expires September 30, 2012, and a new program has to be in place before then for FDA to be able to continue collecting industry payments, which now support some 60 percent of the cost of assessing new drugs and biologics.
Fighting RebatesOne of the most contentious proposals is to impose price controls on Medicare drug benefits, here in the guise of rebates on Part D drugs, specifically those medicines consumed by low-income seniors who previously obtained drugs from state Medicaid programs that negotiate rebates with manufacturers. The shift of those "dual eligibles" to Part D plans eliminated some of those rebates, and industry critics led by Rep. Henry Waxman (D-Calif.) have been pressing to recoup this pharma "windfall" for several years.
The Congressional Budget Office (CBO) estimates that rebates on drugs for some 10 million seniors who receive low-income subsidies under Part D would save $112 billion over the next decade, or $10 billion a year. That's too big a number for the budget-cutters to ignore.
John Castellani, president of the Pharmaceutical Research and Manufactures of America (PhRMA), is fighting rebates with data showing that such a policy will prompt biopharmaceutical companies to shift operations—and US jobs—overseas. A Battelle study for PhRMA calculates that a $10 billion hit on industry revenues would kill 130,000 high-paying jobs—not good for reducing unemployment.
The rebate plan, moreover, could destabilize Part D, which has been a huge success in cutting the cost of medicines for seniors during 2006 to 2010, according to another report for PhRMA by the IMS Institute for Healthcare Informatics. At the same time, CBO calculates that the total cost of Part D is 41 percent less than its initial estimates, partly because plans have negotiated hefty discounts from manufacturers. Most important, increased use of prescription drugs due to Part D significantly reduced Medicare spending on hospital and nursing home care, reports a separate study published in the Journal of the American Medical Association (July 27).