[Ip-health] NYT: More Cost Cuts Sought From Drug Industry

[Sarah Rimmington]

[snip] Mr. Waxman is also looking for a much tougher bargain with drug
makers on another pivotal piece of the cost puzzle =97 the effort to allow
generic competition in so-called biologic drugs, which represent the
most expensive and fastest growing part of the market. The drugs, many
of them used against cancer, can cost tens of thousands of dollars a year.

As a trade-off for opening that market to generic competitors for the
first time, the Senate health committee last week voted 16 to 7 to give
the name-brand drug companies 12 years of exclusive marketing rights
before a copycat biologic drug could go on the market. =93That was a huge
vote,=94 Mr. Tauzin said.

But Mr. Obama still wants to hold the line at seven years, his aides
said Tuesday. And Mr. Waxman wants to offer the brand-name industry only
five years of profit protection.

=93There=92s no justification for giving them monopoly pricing for their
drugs for such a long period of time,=94 he said. [snip]


http://www.nytimes.com/2009/07/23/business/23pharma.html?hp
July 23, 2009
The Work-Up
More Cost Cuts Sought From Drug Industry
By DUFF WILSON

The pharmaceutical industry has remained relatively unscathed so far in
Washington=92s effort to overhaul the nation=92s health care system. But it
is too soon for drug makers to declare victory =97 especially now that the
cost of health care has become a central issue in the debate.

Despite the much publicized 10-year, $80 billion cost-saving promise the
drug industry made to President Obama and the chairman of the Senate
Finance Committee last month, some House leaders do not think the drug
makers have given enough.

And Mr. Obama seemed to agree Wednesday night in a nationally televised
news conference focused on health care reform. He praised the
pharmaceutical industry for making a hard commitment, but added, =93We
might be able to get $100 billion out of them, or more.=94 Mr. Obama
offered no specific plans to increase the companies=92 contributions to
health care savings.

Chief among the Congressional critics of the drug industry is Henry A.
Waxman, chairman of the House Energy and Commerce Committee, which is
playing a lead role on the health overhaul.

For starters, Mr. Waxman wants the drug industry to give up an
additional $63 billion over the next decade. That would come by
reversing a 2006 policy change that removed millions of low-income
elderly from Medicaid drug coverage and had them pay higher prices for
the same drugs under Medicare =97 a move he has called a =93windfall for
drug companies.=94

Billy Tauzin, head of the drug industry=92s main trade group, said that
his members could not support that change. =93What Waxman is trying to do,
you not only break the deal, you break the bank for us,=94 said Mr.
Tauzin, president of the Pharmaceutical Research and Manufacturers of
America.

But Mr. Waxman said in an interview Wednesday night: =93I know they have a
deal with the Senate, and I think they do have a deal with the White
House, but I don=92t know how pinned down it all is. But they don=92t have =
a
deal with us =97 the House.=94

Mr. Waxman is also looking for a much tougher bargain with drug makers
on another pivotal piece of the cost puzzle =97 the effort to allow
generic competition in so-called biologic drugs, which represent the
most expensive and fastest growing part of the market. The drugs, many
of them used against cancer, can cost tens of thousands of dollars a year.

As a trade-off for opening that market to generic competitors for the
first time, the Senate health committee last week voted 16 to 7 to give
the name-brand drug companies 12 years of exclusive marketing rights
before a copycat biologic drug could go on the market. =93That was a huge
vote,=94 Mr. Tauzin said.

But Mr. Obama still wants to hold the line at seven years, his aides
said Tuesday. And Mr. Waxman wants to offer the brand-name industry only
five years of profit protection.

=93There=92s no justification for giving them monopoly pricing for their
drugs for such a long period of time,=94 he said.

It is not remarkable that a top Democrat like Mr. Waxman would be taking
a hard line against drug makers. After all, the pharmaceuticals industry
has long been a target of attack by the Democrats who now rule Washington.

What is more notable is that on many other issues in the health care
debate, the drug industry seems to have staved off some of the measures
it most feared. None of the legislative packages now favored by the
Democratic leadership, for example, include long-simmering proposals to
let Americans buy cheaper drugs from Canada. Nor is there a push to end
the tax breaks for drug advertising that some critics say promote the
unnecessary use of costly pills.

And seemingly off the table is any talk of giving the federal government
new powers to negotiate drug prices with the pharmaceutical industry.

=93PhRMA=92s biggest worry is price negotiation,=94 said Steven Findlay, a
health policy analyst at Consumers Union, using the nickname for the
drug industry group. =93They would like to keep that totally off the table
=97 this year and forever.=94

John Rother, executive vice president of AARP, the lobby for older
Americans and a longtime critic of the drug industry, described PhRMA as
=93one of the big winners so far in health care reform.=94

=93It=92s only surprising in the context of calls that everyone should give
something and that we need to slow down the rate of health care costs,=94
Mr. Rother said. =93So you don=92t expect then to see an industry coming
away with huge wins.=94

Mr. Tauzin, PhRMA=92s president, has led the group since shortly after he
left Congress in 2005, where as a Louisiana Republican he was chairman
of the same House committee now headed by Mr. Waxman.

Mr. Tauzin has helped PhRMA build a compelling public policy argument on
behalf of prescription drugs: they account for only 10 percent of the
nation=92s health care spending. They help people avoid hospitalization
and other more costly medical treatments and their profits pay for
research and innovation that result in newer, better drugs.

Mr. Tauzin, who has been battling intestinal cancer for several years,
credits drugs for his own survival.

=93All we have to do is convince America we are trying to save lives,=94 he
said, citing studies that each dollar spent on drugs saves $6 in other
health costs.

It is an argument backed by an army of lobbyists and a huge political
war chest.

Drug companies have invested nearly $1 billion in lobbying over the last
decade, more than any other industry, according to the nonprofit Center
for Responsive Politics, and more than $100 million in campaign
donations, increasingly to Democrats. And the drug industry in the last
three months has increased its spending, according to reports filed
Tuesday: PhRMA spent $6.2 million during that period and 10 drug
companies each spent more than $1 million.

A crucial moment for the industry came a month ago when Mr. Obama and
Max Baucus, chairman of the Senate Finance Committee, announced that
PhRMA had agreed to come up with $80 billion in drug savings for seniors
and federal health programs over the next decade.

About $36 billion of that would come from a 50 percent discount on
name-brand drugs when people using the Medicare Part D drug program
enter the so-called doughnut hole =97 a built-in gap in the federally
subsidized coverage when enrollees must pay for their drugs out of their
own pockets.

A Deutsche Bank stock analyst termed the 50 percent offer =93a palatable
form of concession=94 since it would also raise new revenue from people
who would otherwise stop buying the drugs or switch to lower-price
generics. A Barclays Capital analyst called the offer =93less than what
meets the eye.=94

But it was the first industry group to make a savings pledge, and it
came at a time Mr. Obama=92s health care agenda needed a political kick-sta=
rt.

On July 7, Rahm Emanuel, Mr. Obama=92s chief of staff, and Mr. Baucus
assured at least five pharmaceutical companies during a White House
meeting that there would be no provision in the final health care
package to allow the reimportation of cheaper drugs from Canada or
elsewhere, according to Mr. Tauzin.

The industry=92s message, Mr. Tauzin said, was, =93Don=92t put us in a big
negative fight over this issue while we=92re trying to help you pass
something that would be good for the American public.=94

The meeting included chief executives from Pfizer, Merck, Amgen,
AstraZeneca and Abbott Laboratories.

=93This time our industry has a seat at the table and our voice is being
heard,=94 Richard T. Clark, Merck=92s chief, said in a conference call
Tuesday with stock analysts.

Reid H. Cherlin, a White House spokesman, said Tuesday that the
administration was happy with the =93unprecedented commitment=94 from =93an
industry that has opposed health reform efforts in the past.=94

The rest of the $80 billion cost-savings package tentatively includes
more than $15 billion in higher rebates for Medicaid drugs, much of
which Mr. Obama was already seeking in his budget. The pledge also
projects about $9 billion in federal savings from the advent of generic
competition in biologic drugs, and additional billions from imposing
some sort of new fee on the industry.

The details are expected to emerge from Mr. Baucus=92s bill, which is
still under cloak as he negotiates concessions from other industries.

=93We=92ll do it in a way they want,=94 Mr. Tauzin said.

Meanwhile, Mr. Tauzin met last weekend with the Blue Dog Democrats, who
control the swing votes on Mr. Waxman=92s committee. He said the fiscally
conservative group =97 which he helped found in 1994 before he switched
parties =97 gave PhRMA a good reception.

Even if PhRMA feels secure in its understanding with the White House and
Mr. Baucus, the industry knows it must still try to bring Mr. Waxman=92s
committee and the House around to its way of seeing things.



--
Sarah Rimmington
Attorney
Essential Action, Access to Medicines Project
Washington, DC
Tel: +1 (202) 387-8030
Cell: +1 (202) 422-2687
www.essentialaction.org/access/