Republican gains in Congress create uncertainty for healthcare reform, drug regulation, and biomedical research.
The Republican wave that swept many long-standing Democrats out of Congress and state houses last month raises unusual challenges for pharmaceutical manufacturers. While the slow pace of economic recovery and continued high unemployment were the top issues stirring voter discontent, healthcare reform emerged as a deciding factor when unhappy Americans went to the polls.
With new leaders controlling the House of Representatives, and Democrats holding a narrower majority in the Senate, Republicans will be looking to deliver on promises to cut government spending and to repeal or revise what they call "Obamacare." This will not be an easy task, as many provisions of the Affordable Care Act (ACA) are highly popular, including closing the doughnut hole in the Medicare drug benefit, requiring insurers to cover patients with pre-existing conditions, and providing tax credits for small businesses purchasing employee coverage. There's broad support for approving similar versions of biotechnology therapies that will be more affordable for patients, a provision championed by consumers and biopharmaceutical manufacturers alike.
To satisfy candidates who ran successfully against Obamacare, the new House leaders are gearing up for a vote to repeal healthcare reform early next year. This move would largely be a symbolic gesture because it's unlikely to pass the Senate or override Obama's veto pen. Drug companies and insurers are anxious to extend coverage to the 30 million uninsured Americans in order to expand markets, and the individual mandate is key to achieving this goal; without some penalty for being uninsured, consumers will wait until they are sick to purchase health insurance, and premiums will rise. The worst-case scenario for biopharmaceutical manufacturers is that the promised expansion in healthcare coverage evaporates, leaving companies with added fees and rebates, and considerable uncertainty about reimbursement for new therapies that are costly to develop.
Cuts and revisions
Instead of wholesale repeal of ACA, the new Congress will be looking to challenge specific provisions in the bill. Medical product makers and insurers would like to roll back the billions in added taxes imposed on them to help finance expanded coverage. One piece of low-hanging fruit that even President Obama agrees should be modified is a cumbersome tax-reporting provision that requires businesses to file 1099 forms with the IRS for payments for goods and services worth more than $600 during the year.
In Washington this month
Republicans also may implement a seldom-used policy that permits Congress to pass resolutions blocking new regulations before they go into effect. And they may propose medical malpractice reforms to protect doctors who follow "best practice" guidelines.
A prime target for the axe, according to manufacturers and providers, is the Independent Payment Advisory Board (IPAB), which has broad powers to set payment policy for Medicare and to recommend changes in private-sector payment systems. Doctors and hospitals are leery of IPAB's authority to implement rate cuts, and manufacturers fear the Board will propose lower acquisition costs of drugs —particularly high-cost therapies—without weighing how these treatments can help lower healthcare costs overall.
Senate Republicans offered legislation in July to eliminate the advisory board, arguing that members of Congress, and not "unelected, unaccountable bureaucrats," should make the important decisions on how to control Medicare spending. At the Mid-Atlantic Biotechnology Industry Organization (BIO) conference a few weeks ago, John Castellani, president of the Pharmaceutical Research and Manufacturers of America (PhRMA) since September, noted concern about the board's "sweeping powers" to revise Medicare payment policies without any outside legal review. Congress is supposed to start funding IPAB in 2012 so that it can be up and running in 2014, but that may not happen.
Members of PhRMA are hoping that Republicans will be responsive to industry concerns about excessive regulation and threats to innovation, but some GOP leaders still resent industry's support for healthcare reform. Last year, Rep. John Boehner (R-OH), who is slated to be the next speaker of the House, castigated PhRMA for its deal with the White House to ante up some $80 billion in higher Medicaid drug rebates and subsidies on doughnut-hole drugs, in return for administration opposition to drug reimportation and government price negotiation.
With the anti-health reform rhetoric heating up in recent months, manufacturers have moved to rebuild their traditional ties to Republicans. A top priority for PhRMA and BIO in the coming year is to gain renewal of the Prescription Drug User Fee Act (PDUFA). Republicans traditionally have been less concerned than Democrats that user fees make the Food and Drug Administration too dependent on industry. However, the new powers on Capitol Hill may want to hike the fees to cover more FDA activities as part of efforts to reduce government appropriations.
In addition to attacking select ACA provisions, Republicans also may move to starve implementation of new healthcare reform programs. Rep. Boehner has mentioned cutting the federal budget by $100 billion, which will reduce government outlays for non-military discretionary funds down to 2008 levels. One part of this strategy is to curb appropriations needed by the Department of Health and Human Services (HHS), the Internal Revenue Service, and other agencies to establish new ACA initiatives.
Taking healthcare reform to court
Making substantial reductions in federal spending, however, will not be any easier for Republicans than Democrats. With their eye on ousting President Obama in 2012, Republicans may shy away from any talk of reforming social security or Medicare. And most Republicans have their own lists of pet programs meriting federal support.
Complicating the situation is the need for Congress to immediately deal with some high-cost issues. Congress left town early last fall to hit the campaign trail without finalizing the federal budget for fiscal year 2011, which now is months overdue. Medicare fees for physicians will plunge by 30% Jan. 1, 2011 unless the legislators extend that deadline for another year. And important Bush era tax breaks, which Republicans are eager to retain, also expire Dec. 31 unless Congress renews or extends them now.
Big curbs on government spending could create problems for biomedical researchers. Reducing federal outlays, as Boehner proposes, could be devastating to FDA, the National Institutes of Health (NIH), and various health and social programs. NIH would lose about $3 billion, almost 10% of its current budget, and new FDA initiatives would fall by the wayside. Even if FDA and NIH escape heavy cuts, needed increases in resources are unlikely.
The Republican takeover of the House also sets the stage for more intense scrutiny of administration policies by the committees responsible for health and biomedical programs. The new leaders of the House Energy & Commerce Committee are eager to grill HHS Secretary Kathleen Sebelius and her top aides on healthcare reform cost estimates and the effect of specific policies on employer coverage, premiums, and benefits. The panel also plans to hold hearings on FDA policies and initiatives that could be added to user-fee renewal legislation.
Rep. Darrell Issa (R-CA) is in line to chair the House Oversight and Government Reform Committee, where he will be able to issue subpoenas to access desired government documents. At hearings this fall on FDA's handling of Johnson & Johnson's and McNeil Consumer Healthcare's recall of adulterated over-the-counter medicines, Issa criticized FDA for taking too long to shut down the noncompliant J&J plant and for withholding information sought by committee investigators.
Although Democrats retained control of the Senate, there will be notable changes in health-related committees. Sen. Orrin Hatch (R-UT) will play a more prominent role in proposing healthcare reform changes as the ranking Republican on the Senate Finance committee; Hatch replaces Sen. Charles Grassley (R-IA), a long-time critic of pharma and of FDA. The Senate Health, Education, Labor and Pensions (HELP) committee lost two long-term members due to retirement: Democrat Chris Dodd of Connecticut and Republican Judd Gregg of New Hampshire. Chairman Tom Harkin (D-IA) and ranking Republican Mike Enzi of Wyoming will continue to be lead players in crafting health policy and FDA user-fee renewal legislation.
One of the most important provisions in ACA for manufacturers is the Biologics Price Competition and Innovation Act (BPCI), which authorizes FDA to establish an abbreviated framework for approving "highly similar" versions of licensed biological products. FDA launched the lengthy process of implementing this measure by holding a two-day public hearing last month to discuss the views of manufacturers, academics, pharmacy groups, and patient advocates on how to develop relevant processes and policies. Most of the 50-some speakers at the meeting agreed that follow-on biologics have to be safe and effective and of high quality, and that some clinical trials may be needed to document comparability of these complex large molecules. Patient advocates urged speedy FDA action to bring needed therapies to patients at affordable prices, but also backed thorough product assessment to ensure comparability to reference products.
Innovator firms, as expected, proposed a high bar for follow-on biologics, with extensive product characterization, comparative clinical trials, post-market studies, pharmacovigilance requirements, and dim prospects for achieving interchangeability. Pharmaceutical and biotechnology manufacturers also want biosimilars to be very distinct from innovator drugs, with unique names and codes and labeling that admittedly will limit prescribing. "Biosimilars will be similar, but not the same," stated PhRMA associate vice-president Marie Vodicka.
Follow-on biologics advocates agreed that some preclinical and clinical testing is warranted, but that study requests should not be excessive or arbitrary. Interchangeability should be possible, although it may involve additional testing, and follow-ons should be able to adopt the same names and codes as innovators to ease prescribing, dispensing, and postmarket monitoring. Scientists noted that new technology can better characterize biologics, making some in vivo testing unnecessary—and thus avoiding the ethical issues raised by requiring sponsors to conduct redundant animal and human studies.
FDA has to set user fees for follow-on biologics applications, and pharmaceutical companies want sponsors to fully cover the agency's advisory and review activities, including postmarketing surveillance. Generic-drug manufacturers are looking for moderate fees linked to metrics that will expedite approvals and not "create a barrier for entry for biogenerics," stated Mylan Vice-President Rasmus Rojkjaer, representing the Generic Pharmaceutical Association (GPhA) at the hearing.
Generic-drug makers are unhappy that the BPCI provides 12 years of data exclusivity for innovator biologics, and they're livid over the prospect of an additional exclusivity period—or patent "evergreening"—for "next generation" therapies. BIO Executive Vice-President Sara Radcliffe claimed that additional exclusivity for structurally modified products is critical to preserving incentives for innovation. FDA has the difficult task of determining when changes in a product's safety, purity, or potency make it sufficiently distinct to warrant additional exclusivity.
The new law broadened the definition of "biologic" to include certain proteins such as insulin and human growth hormone that have been regulated for years as drugs. Now generic versions of these products may require more extensive testing to come to market, once FDA sorts out which proteins and polypeptides should be considered biologics, and which are chemically synthesized and thus remain drugs.
Another contentious topic is whether sponsors of follow-on biologics can reduce the scope of clinical testing by extrapolating data from one study to additional populations or indications. Extrapolation of results across indications may be appropriate when the product's mechanism of action is well-understood, explained Parexel principal consultant Bruce Babbitt. But Jim Shehan, vice-president of Novo Nordisk (Princeton, NJ), urged caution is using this approach unless "scientifically justified." The use of foreign clinical data also came up at the hearing, along with discussion of whether a biotech therapy approved in Europe, but not in the US, can serve as the reference product for FDA approval of a biosimilar.
Rachel Behrman, director of the Office of Medical Policy in the Center for Drug Evaluation and Research (CDER), chaired the meeting and will be weighing these statements and additional comments filed with the agency through Dec. 31, 2010, in developing agency proposals. John Jenkins, director of CDER's Office of New Drugs (OND), chairs FDA's Biosimilars Review Committee that will coordinate advice to sponsors on developing biosimilars and the review of resulting applications. Jenkins has appointed Leah Christl as acting OND associate director for biosimilars to oversee policy implementation and relevant training of OND reviewers.
FDA is expected to issue guidance on many of the key issues discussed, even though sponsors can submit follow-on biologics applications before then. Many experts supported more formal guidance to ensure transparency and predictability for biosimilar development, while some advocated for a flexible and case-by-case approach to weighing test requirements for these products. The challenge for FDA will be to do both.
Jill Wechsler is Pharmaceutical Technology's Washington editor, 7715 Rocton Ave., Chevy Chase, MD 20815, tel. 301.656.4634, firstname.lastname@example.org