Obama Budget & Pharma: Highlights Or Lowlights?

The latest annual budget from the White House was, not surprisingly, met with disappointment by the pharmaceutical industry. The Obama administration proposes a significant boost in rebates for Medicare Part D; limit so-called pay-to-delay patent settlements and reduce data exclusivity from 12 years to seven years for drugmakers that develop biosimilars (you can read it here).

The response was swift. In a statement, PhRMA ceo John Castellini lambasted most everything and warned that the "proposed mandatory rebates in Medicare Part D are a short-sighted proposition that could destabilize the program and threaten hundreds of thousands of American jobs... This is not an investment in America’s future and these proposals should not be considered.”

Drugmakers are being asked to provide $156 billion in discounts over the next decade as part of a proposal to save $362 billion. Pharma, you may recall, agreed to provide $80 billion in discounts and rebates under the 2010 health-care law. And brand-name drugmakers currently provide rebates of up to 15 percent for Medicaid, but the White House wants to cover the so-called dual eligibles, or about 9 million seniors who qualify for both programs.

"Under current law, drug manufacturers are required to pay specified rebates for drugs dispensed to Medicaid beneficiaries. In contrast, Medicare Part D plan sponsors negotiate with manufacturers to obtain plan-specific rebates at unspecified levels. The Department of Health and Human Services Office of Inspector General has found substantial differences in rebate amounts and net prices paid for brand name drugs under the two programs, with Medicare receiving significantly lower rebates and paying higher prices than Medicaid," the budget proposal explains.

"Moreover, Medicare per capita spending in Part D is growing significantly faster than that in Parts A or B under current law. This proposal would allow Medicare to benefit from the same rebates that Medicaid receives for brand name and generic drugs provided to beneficiaries who receive the Part D Low-Income Subsidy beginning 2013. Manufacturers previously paid Medicaid rebates for drugs provided to the dual eligible population prior to the establishment of Medicare Part D. The Fiscal Commission recommended a similar proposal to apply Medicaid rebates to dual eligibles for outpatient drugs covered under Part D."

Despite the prospect of additional rebates, AARP, for instance, was not thrilled. In a statement, AARP ceo A. Barry Rand says the group remains "concerned about proposals that would not address high health costs, but would simply shift those costs to other payers, particularly Medicare beneficiaries. We remain opposed to such cost-shifting, whether through higher copayments and deductibles, or through higher premiums, including further income relating the premiums of better-off seniors who already pay more for Medicare."

Meanwhile, the White House noted that the FDA budget would total $4.49 billion for the year beginning October 1, which would amount to a 17 percent boost, reflecting increased user fees, in particular. These include a new user fee totaling $299 million to support generics and another $20 million for biosimilars. Over the past five years, about a third of FDA funding was generated by industry fees, but this would increase to 45 percent in the proposed budget. About $10 million of the FDA budget would be used to hire 19 inspectors to focus on China, with 16 work there on food and drug safety and standards (you can read more specifics here).

pic thx to imagesofmoney on flickr and taxbrackets.org