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Pharma fury as Obama seeks "pay for delay" ban

World News | April 15, 2013


Lynne Taylor

Pharma fury as Obama seeks "pay for delay" ban

Drugmakers have attacked US President Barack Obama's proposed FY 2014 budget, which would require them to pay increased Medicare drug rebates and ban "pay for delay" deals between brand-name and generics firms.

The $3.8 trillion budget calls for drugmakers to contribute $169 billion toward healthcare spending cuts over 10 years.  $123 billion of this would come from requiring them to provide the same rebates to low-income seniors enrolled in Medicare as they do for beneficiaries of Medicaid, the state/federal health programme for the poor, which generally pays considerably less for brand-name drugs than Medicare.

Pres Obama is also seeking to close the Medicare Part D (prescription drug programme) coverage gap, known as the "doughnut hole," by 2015, instead of 2020 as originally planned, saving an estimated $11 billion over the next decade through a mandatory increase on discounts for brand-name drugs supplied through the programme from 50% to 75%, starting in 2015.

The White House also wants wealthier Medicare beneficiaries to pay higher premiums for their Part D and Part B ("medically necessary" and preventive health) services, starting in 2017, saving an estimated $50 billion over 10 years, and to encourage greater use of generics by increasing enrollees' co-pays for branded drugs and cutting those for generics, saving an estimated $7 billion.

The budget would also ban "pay for delay" agreements and reduce market exclusivity for biologic drugs to speed the development and market entry of biosmilars, saving more than $14 billion over the decade.

Healthcare spending accounts for 25% of total federal expenditures, and in his budget speech, the President said Democrats and Republicans agree that "the rising cost of care for an ageing generations is the single biggest driver of our long-term benefits."

"The reforms I'm proposing will strengthen Medicare for future generations without undermining that ironclad guarantee that Medicare represents," he said.

A number of the drug industry elements included in the FY2014 budget had previously been put forward by the President but then withdrawn in return for the sector's support for his healthcare reform legislation, and the Pharmaceutical Research and Manufacturers of America (PhRMA) has condemned the return of these "stale, previously-rejected proposals." 

"This budget is bad for patients, bad for innovation and bad for the economy," said PhRMA senior vice president Matthew Bennett.

Imposing Medicaid-style rebates on Medicare Part D will harm patients by leading to more expensive beneficiary premiums, co-pays and more restrictive access to medicines, warns PhRMA. 

And banning or discouraging patent settlements between innovator and generics companies "would increase the cost of patent enforcement, decrease the value of patent protection generally and decrease incentives for taking the risks necessary to develop new medicines," the group adds.

The Generic Pharmaceutical Association (GPhA) also condemned the proposed ban on patent settlements, saying that it is "based on outdated assumptions and faulty methodology." And while Medicare Part D "has remained an example of cost-efficiency for the government, costing approximately $340 billion, or 40%, less than the original estimates, this is largely due to the market-based competition built into the programme," it says.

"Imposing rebates would upset this structure, and likely have the unintended consequence of shifting costs onto American consumers purchasing their care in the private marketplace," GPhA warns.

Seniors' advocacy group AARP welcomed the budget's moves to cut prescription drug costs and close the Part D doughnut hole. However, the organisation's executive vice president, Nancy LeaMond, also pointed to need to look for savings throughout the healthcare system.

 "In additional to lowering the costs of prescription drugs, innovations that promote better care, reward improved outcomes and make healthcare programmes more efficient and less wasteful have the potential to hold down systemic high healthcare costs, including costs in Medicare,” she said.

- Pres Obama’s budget proposal would also increase Department of Health and Human Services (HHS) discretionary funding by £3.9 billion to $80.1 billion. The Food and Drug Administration (FDA)'s budget would rise 21% to $4.8 billion, but the vast majority of this would come from user fees, which are set to account for 45% of the agency's budget in FY2014 - soaring to 64% for its human-use drug programmes.

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