Pricing Is a Hot Topic for 2001

Although the extremely close race for the White House and for control of Congress in November signaled a lack of consensus on national health policy, voters have made it clear they are unhappy about the high cost of medical products. That was one of the few issues to emerge from the political haze, and it promises to shape the debate on numerous health and medical topics. The deadline for reauthorizing the FDA user fee program in 2002 also provides a timeframe for developing new programs and policies affecting a number of critical pharma issues.

Pharmaceutical pricing. Last year's presidential campaign pitted the Democrats' proposal to include a universal pharmaceutical benefit in Medicare against the Republicans' plan for insurers to offer coverage plans. The debate helped several Democratic candidates gain Senate seats and was a pivotal issue in Florida and other key states. It also caused a rift between the pharmaceutical industry, which prefers the market-based GOP approach, and the insurance industry, which maintains that pharmacy-only health policies will not work. Broader reform of the entire Medicare program to include prescription coverage could address those problems but is unlikely in the new highly partisan and evenly divided Congress.

The main problem with the pricing issue is that it's extremely difficult to reduce spending on medicines and deliver quality care at the same time. The aging US population will consume more and more prescription drugs, which have become an integral component in the treatment of critical and chronic diseases. Experts agree that rising consumption is boosting expenditures more than price hikes, but that observation does little to help individuals who lack prescription coverage and have to pay high out-of-pocket costs.

Most access proposals involve either curbs on prices or management of medicine use through formularies, co-pays, and other restrictions. Patients and physicians don't like the latter, and manufacturers strongly object to anything that smacks of price controls. Industry leaders insist that such policies will discourage private sector investment in new research and will drive up healthcare expenditures in the long run.

Despite those concerns, members of Congress have proposed several bills to reduce drug expenditures. Some seek to expand access to lower federal supply schedule prices or to require rebates as Medicaid does. Just before the elections, Congress enacted a measure to facilitate the import of lower-cost medicines from abroad. (See "Playing Politics With Imports," PE Washington Report, December 2000.)

Government investigators are also looking for opportunities to cut pharmaceutical administrative spending. The Health and Human Services Inspector General is examining state AIDS drug assistance programs to determine if they pay too much for therapies. Congressional leaders are questioning whether Medicare pays inflated prices for the medicines it does cover because of alleged manufacturer manipulation of average wholesale prices, a query that could alter industry pricing practices and Medicare reimbursement for pharmaceuticals. (See "Medicare Manipulations," PE Counterpoints, November 2000.)

States are also taking action to limit spending by pharmacy assistance programs. Maine is out front with a new policy to compel brand name companies to negotiate rebates. Manufacturers have filed a lawsuit to block the Maine program on the grounds that it interferes with interstate commerce, and a major legal battle lies ahead as more states adopt similar programs.

One emerging issue is the role that FDA may play in the drug-pricing debate. "FDA has nothing to do with setting prices," emphasizes Janet Woodcock, director of FDA's Center for Drug Evaluation and Research (CDER). The current FDA effectiveness standard for approval does not include any comparative standard, Woodcock notes, but this is not the case in all countries. FDA may begin to look comparatively at products in clinical trials as policy makers consider whether and how to measure a given medicine's value compared to other treatments.

Generic drug availability. The campaign to make medicines more affordable is expected to spur efforts to increase generic competition. Congress will examine proposals in that area as generics makers and innovator firms vie for desired changes in the Hatch-Waxman Act of 1984. Although the legislation has spurred the development of thousands of generic products, the policy also encourages all parties to manipulate the FDA approval process and the patent system. Last fall, Senators John McCain (R., Arizona) and Charles Schumer (D., New York) offered legislation to boost generics by revising patent policy, curbing citizens petitions that delay FDA approvals, and blocking some of the defensive tactics used by innovator firms. The Federal Trade Commission is also investigating allegations of manufacturers' anticompetitive attempts to keep generic products off the market.

One controversial topic that is sure to surface is the extension of Waxman-Hatch to biotech therapies, which sets the stage for generic biologics in the future. Another is whether FDA's pediatric labeling program granting six-month patent extensions to companies studying pediatric uses, has been overly generous to brand-name companies. Generics makers believe that fewer products should be eligible for pediatric patent extensions and that testing requirements should be more stringent. Discussion of those issues will also extend to broader biomedical concerns, such as the viability of gene-based patents and intellectual property protection for other new technologies.

Impact of DTC advertising. Critics of high pharmaceutical costs are quick to point to the surge in consumer advertising as a critical factor driving consumption. Multimillion-dollar outlays for television commercials, they claim, not only boost manufacturer expenses directly but also spur patient demand for new prescriptions. A noticeable shift in consumption from less expensive old medicines to more costly new therapies has raised questions about the role of advertising in encouraging unnecessary spending.

FDA has been relatively supportive of DTC communications. Although there is growing concern about DTC ads increasing inappropriate prescribing, Woodcock notes that consumer advertising can also help the large undertreated segments of the US population.

"There is a wide range of conditions for which life-saving therapies are available, but people are not getting them," Woodcock observes. "Unfortunately, there has been a lot of heat about DTC advertising, but not a lot of light cast on the real issues."

Product safety. DTC opponents also claim that high-pressure marketing tactics raise serious concerns about medication safety. FDA has been involved in a number of safety issues in the past year that have led to product withdrawals and limits on prescribing. FDA asked Warner Lambert to withdraw its diabetes treatment Rezulin (troglitazone) last March because of liver toxicity problems. Roche's Accutane (isotretinoin) has been linked to serious side effects, including some that resulted in suicide. More recently, FDA banned all over-the-counter products containing phenylpropanolamine, also known as PPA.

Concerns about vaccine safety have also emerged as a hot topic on Capitol Hill. Lawmakers have called for a ban on the mercury compound Timerosal in vaccines for children and plan to press for changes in vaccine injury compensation policies to beef up patient protections. New liability policies, though, could jeopardize industry investment in that area.

The risk and safety debate raises the question of whether FDA is approving new medicines too quickly to meet user-fee timetables. FDA officials refute the charge but are moving to expand adverse event reporting systems and to encourage safe medication use by healthcare providers. CDER is also exploring strategies to limit physician prescribing and distribution of high-risk therapies. Such programs are difficult to execute, however, as seen when FDA recently asked Glaxo Wellcome to withdraw its irritable bowel syndrome treatment Lotronex (alosetron) despite the company's efforts to manage its use through label warnings and a medication guide.

Although product safety is FDA's prime concern, the agency is working with manufacturers to avoid product shortages resulting from safe-prescribing or quality-control problems, which recently led to serious shortages of flu vaccine. FDA is drawing up a list of critical single-source medicines so that it can respond to looming shortages, possibly through expedited approval of alternative products or an accelerated review of manufacturing changes.

R&D issues. The biotechnology revolution and gene-based discoveries promise to spur drug discovery at an increasing rate. Stem-cell research, proteomics, xenotransplantation, and genomics have enormous potential for generating treatment breakthroughs, including individualized therapies that are more efficacious and have fewer side effects.

Tempering the excitement over those scientific developments is concern that FDA testing and review requirements could create bottlenecks for bringing new medicines to market. At the same time, public concern is mounting about unethical treatment of human research subjects arising from conflicts of interest, inadequate oversight, and faulty informed consent procedures. An intergovernmental task force headed by HHS' new Office for Human Research Protections is developing policies to address those issues.

Biomedical research will also be affected by the government's new rules on medical record confidentiality. The desire to protect patient privacy may limit access to and use of medical databases and healthcare information important for identifying research subjects and for monitoring disease and treatment effects.

Global harmonization. The fifth meeting of the International Conference on Harmonization (ICH) last November marked ten years of collaboration to develop common technical standards for testing and manufacturing pharma and biotech therapies. The highlight was the unveiling of the Common Technical Document for submitting similar market applications to regulatory authorities around the world, eventually through electronic systems. Future efforts will encourage developing nations to adopt ICH policies as they become increasingly involved in pharma R&D. Wide use of common testing and regulatory policies promises to reduce demand for human and animal test subjects while curbing development costs and speeding access to new therapies.

Efforts to establish a mutual recognition agreement (MRA) for pharmaceutical plant inspections by the United States and the European Union have been less harmonious and face critical decisions this year. Although the United States and Australia recently agreed to exchange plant inspection reports, the US-EU MRA is mired in disputes over equivalence assessments and the right to review each other's inspection reports. Those issues could jeopardize the inspection pact and generate international trade disputes with Europe.

The task of dealing with such issues will fall to a whole new cadre of government officials. The Department of Health and Human Services will have a new secretary, who will name new directors for the National Institutes of Health and the Health Care Financing Administration, among other agencies. Although only the FDA commissioner is a political appointee, changes in leadership could have broader repercussions throughout the agency.

Capitol Changes

CDER, for example, already has several key vacancies in its senior ranks, which is certain to change its management. Additional restructuring may involve moving around CDER's Office of Post-Marketing Drug Risk Assessment and its Office of Clinical Pharmacology and Biopharmaceutics. Reductions in the center's operating budget may require further cuts in compliance and research activities. Those and other FDA funding issues will be on the table as negotiations begin for revising the user fee program.

On Capitol Hill, the House Commerce and Ways and Means committees that oversee issues affecting healthcare and FDA will have new chairs, created by retirements and House rules limiting the tenure of committee heads. In the Senate, Sen. Charles Grassley (R., Iowa) is in line to take the helm of the powerful Finance Committee, and panels that approve annual budget appropriations for FDA, NIH, and government health agencies also will have new leaders.

The drawn-out legal battle for the White House and the sharply divided Congress will make it difficult for any one party to control the health policy agenda. The nearly even split among voters will require political leaders to adopt a new spirit of bipartisanship or face complete gridlock on the policy front for at least the next two years. Republicans will not be able to steer a Medicare benefit proposal or other important legislation through Congress without strong support from Democrats. To make any progress, GOP leaders will have to include enough safeguards to offset Democratic concerns about market-based reforms. At the same time, the loyal opposition will have to decide that it has more to gain from taking action on pharmaceutical access than from being able to attack a "do-nothing" Congress in 2002.