Healthcare Reform Draws Mixed Reviews from Pharmaceutical and Biotechnology Industries

On Mar. 23, President Barack Obama signed into law major healthcare reform legislation, The Patient Protection and Affordable Care Act (HR 3590), following the passage of the bill by the House of Representatives on Mar. 21 by a vote of 219 to 212, which was the previously passed healthcare legislation by the US Senate. The House also passed a second bill on Mar. 21, the so-called “fixer bill,” Health Care and Education Affordability Reconciliation Act of 2010 (HR 4872), which modifies certain provisions of the newly passed legislation and which has moved to the Senate for consideration. The pharmaceutical and biotechnology industries are largely favorable of the new legislation as a way to expand healthcare coverage, but the legislation is drawing mixed reactions from the innovator-drug and generic-drug industries regarding provisions that establish a regulatory pathway for biosimilars in the United States.

The House of Representatives issued a summary analysis of final health insurance reform, which includes both the newly signed law and the House-passed reconciliation bill, along with a timeline for implementing the measures.

The healthcare measures enacted into law and additional changes in the accompanying reconciliation bill extend healthcare coverage and place additional regulation on health-insurance companies. Some key provisions are:
• Bars insurance companies from discriminating on the basis of preexisting conditions, health status, and gender
• Creates healthcare exchanges or marketplaces where individuals and small businesses can purchase healthcare insurance
• Provides premium tax credits and cost-sharing assistance to low- and middle-income people
• Invests in community health centers
• Empowers the Department of Health and Human Services and state-insurance commissioners to conduct annual reviews of new insurance plans with “egregious” premium increases
• Expands Medicaid coverage and children’s healthcare insurance
• Provides assistance to states for expanded Medicaid coverage

The legislation also changes Medicare. According to the House summary analysis, the legislation fills the so-called Medicare drug “doughnut” hole, a policy position that was supported by the pharmaceutical industry. Under the law, beginning in 2010, Medicare beneficiaries who go into the doughnut hole will receive a $250 rebate. After that, they will receive a pharmaceutical manufacturers’ 50% discount on brand-name drugs. The discount will increase to 75% for brand-name and generic drugs to close the doughnut hole by 2020, according to the summary analysis. The summary also notes that the legislation will add nine years of solvency to the Medicare Hospital Insurance trust fund, provide expanded coverage for chronic illnesses and wellness visits, increase payments for primary care, and encourage reimbursement on the basis of value-based rather than a volume-based approach.

The Pharmaceutical Research and Manufacturers of America (PhRMA) issued a statement on Mar. 21, which was supportive of the passed legislation and accompanying reconciliation legislation, although it pointed to some concerns. “Throughout this long process, we have been guided by a belief that all Americans should have access to high-quality, affordable healthcare coverage and services,” said the PhRMA statement. “This legislation, while not perfect, is a step in that direction.”

In supporting healthcare reform, PhRMA raised concerns over administrative and jurisdictional authority for evaluating and implementing changes to Medicare. “Even as we support healthcare reform legislation, we continue to have concerns about a number of issues, including the overly broad powers of a non-elected Independent Payment Advisory Board (IPAB), which could enact sweeping Medicare changes without action by Congress and would not be subject to judicial or administrative review," said PhRMA in a prepared statement. “We look forward to working with Congress to address these concerns and to identify ways to contain medical costs without creating new barriers to quality healthcare.”

Perhaps the most divisive issue from a pharmaceutical industry perspective are the provisions that establish a regulatory pathway for biosimilars. The Biotechnology Industry Organization (BIO), which represents innovator-biopharmaceutical companies, supported the measure, and the Generic Pharmaceutical Association criticized the provisions.

“The bill includes a historic provision which creates a pathway to enable the US Food and Drug Administration to approve biosimilars.  Thanks to the leadership of Representatives Anna Eshoo (D-CA), Jay Inslee (D-WA), and Joe Barton (R-TX) in the House, and the late Senator Ted Kennedy and others in the Senate, patients living with debilitating diseases will have expanded access to safe and effective cutting-edge medical therapies at lower costs,” said BIO President and CEO Jim Greenwood in a Mar. 22 statement. “…This provision includes the incentives necessary to attract the massive investment required to speed the discovery and development of the next generation of breakthrough therapies and potential cures for the world’s most debilitating diseases. This language establishes equity with the Hatch-Waxman regime, which spurred the availability of the generics market for traditional pharmaceuticals while bringing the same benefits of increased access, lower costs, and expanded competition."

Generic Pharmaceutical Association (GPhA) President and CEO Kathleen Jaeger criticized the biosimilar provisions, in commenting on the House passage of the Health Care and Education Affordability Reconciliation Act of 2010. “Simply put, the bill fails to infuse competition and choice into the healthcare system due to the excessive and unprecedented market exclusivity protections for the brand industry, she said in a Mar. 21 statement. “Until the brand evergreen loophole is closed and the indefinite brand biologic monopolies are addressed, our healthcare system will not see true savings from biogenerics for decades…In sum, while FDA has been given the flexibility to create a workable biogenerics approval pathway, the fact is that the brand market-exclusivity protections in this bill, which supplement the robust, rich patent protection of these brand biologics, will keep affordable biogeneric medicines from patients for decades to come.”

Jaeger did support certain measures of the bill. “The good news is that more Americans will have healthcare coverage and more seniors will have access to generic medicines, thanks to a fix to the so-called doughnut hole,” she said in the statement. “GPhA is pleased that the House has taken these steps to close the Medicare drug coverage gap and has eliminated the patent-settlement provision that would have had the unintended consequence of delaying generic access.”

BIO was also supportive of certain tax credits in the legislation that would benefit small biotechnology companies. “The Therapeutic Discovery Project Tax Credit included in the bill will help offset a portion of the resources spent on therapeutic development activities, including hiring scientists and conducting clinical studies,” said Greenwood.