Health-Reform Controversies - Pharmaceutical Technology

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Health-Reform Controversies
Courts and Congress seek to reshape policies and programs.

Pharmaceutical Technology
Volume 35, Issue 4, pp. 30-36

More oversight

Although pharmaceutical companies traditionally look to Republican allies in Congress to champion patent protection and product exclusivity, GOP leaders still are smarting over PhRMA's support for Obama's healtchare plan. As part of its investigation into HHS implementation of healthcare reform, House E&C Committee Chairman Fred Upton (R–MI) is looking hard at the "secret negotiations" between the White House and healthcare interest groups, including pharmaceutical companies, leading to enactment of the reform legislation. E&C Committee Republicans complained in a Feb. 18, 2011 letter to White House Aide Nancy-Ann DeParle (formerly head of the White House Office of Health Reform) that instead of the open and transparent debate on healthcare legislation that Obama had promised, deals were made behind closed doors with providers, drug companies, and others.

Upton and his colleagues are scrutinizing the HHS process for determining whether states and healthcare providers and payers should receive waivers from complying with specific ACA rules, a process they believe indicates widespread problems associated with implementing the reform law. The E&C Committee also wants to know more about HHS support for establishing state-based insurance exchanges and for developing new rules governing insurers, including standards for "essential benefits" that will shape medical and drug coverage [see sidebar, "Keeping drugs 'essential'"].

Keepings drugs "essential"
FDA operations and policies are also under scrutiny by GOP leaders. The E&C Health subcommittee held a hearing in February to examine whether FDA's slow process for approving more complex medical devices for market is harming US device makers. And Republicans once more are examining the three-year-old heparin crisis, complaining in a Feb. 23, 2011 letter to FDA Commissioner Margaret Hamburg that still no one knows the source of the adulteration nor the Chinese culprits—all while imports in pharmaceutical ingredients from that China are booming.

Unraveling the pieces

In addition to hauling administration officials up to Capitol Hill to explain their actions, Congress is moving forward with efforts to revise portions of the ACA, after failing in January to repeal the legislation. In the low-hanging fruit department, Democrats and Republicans agree on the need to repeal the 1099 reporting policy, a burdensome rule that requires businesses to report to the IRS any expenditure over $600—a requirement that has little to do with healthcare. President Obama has signaled support for killing the program, but the challenge is to find the $22 billion or so needed over the next 10 years to offset potential revenue gains from the policy.

President Obama and Congressional leaders also are eyeing medical-liability reform as a way to reduce spending on unnecessary healthcare services incurred as a defense against malpractice charges. A bill recently approved by the House Judiciary Committee would cap noneconomic and punitive damages, limit the time for filing suits and curb attorneys' contingency fees. Such proposals face considerable opposition from lawyers and some patient advocates, yet Obama expressed interest in revising malpractice policy in his State of the Union speech and included $250 million in his 2012 budget plan to support grants to help states rewrite their malpractice laws and establish health courts. Reform could move forward if there's clear evidence that damage caps would save money by reducing defensive medicine and other costs.

But there's little bipartisan support for improving ACA implementation. President Obama recently voiced support for legislation that permits states to opt out of exchanges and the individual mandate, provided the state can devise alternative ways to cover more uninsured individuals. Although this action was considered a major concession by ACA supporters, Republicans labeled it a "fig leaf" that didn't increase local choices.

The battle continues over Republican efforts to limit federal spending overall. Policymakers avoided a government shutdown in early March by agreeing to a short-term fix on funding the federal government for the current (2011) fiscal year. But Republicans still demanded some $100 billion in cuts for this year, as well as curbs on many ACA provisions, including individual coverage requirements, medical-loss ratio rules, health insurance exchanges, and Medicaid expansion plans.

Critics also are looking to eliminate a number of entities established by ACA, but seen by Republicans as examples of a federal government over-reach into state and private sector activities. Although health prevention has broad appeal, Republicans want to dissolve the Prevention and Public Health Fund, which is supposed to dispense some $15 billion over 10 years to support state and local prevention and health initiatives. This prevention "slush fund," say Republicans, is excessive—and its resources could be tapped to offset the cost of repealing the 1099 IRS reporting requirement.

Republicans also don't see a need to spend $10 billion over 10 years to fund the Center for Medicare and Medicaid Innovation (CMMI), which was established by ACA to support research and testing of reimbursement and coverage approaches for Medicare and other health programs. There's also skepticism among Republicans about federal investment in comparative effectiveness research (CER), when private plans and local organizations have funded technology assessment on their own. Some Republicans would like to shutter the Patient-Centered Outcomes Research Institute (PCORI) and use its $500 million a year in appropriated funds for other purposes. Pharma companies generally support development of standards and policies for CER research, but probably won't expend much effort fighting to preserve PCORI.

There's not much good news for the pharmaceutical industry regarding the battle to repeal and revise healthcare reform. Manufacturers already are paying stiffer Medicaid rebates and absorbing 50% discounts on drugs for Medicare Part D beneficiaries caught in the coverage gap. The IRS is establishing rules for collecting some $2 to $3 billion in new industry taxes beginning this year, based on company sales of branded drugs. At the same time, more onerous legislation is on the table. Once again, there is bipartisan support for a Senate bill to permit reimportation of high-cost medicines from Canada. And Democrats want to eliminate tax deductions for direct-to-consumer advertising.


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