Magazine article Drug Topics

New 2% Solution Not Going Down Well with the Industry

Magazine article Drug Topics

New 2% Solution Not Going Down Well with the Industry

Article excerpt

Just when the pharmaceutical industry thought it couldn't get any worse, it did--2% worse.

When a drat of President Clinton's health-care reform plan was leaked and widely circulated around the capital in early September, it proposed a 15% rebate off average manufacturers price (AMP) as a condition for companies that wanted their products covered under a new Medicare outpatient drug benefit. But when the official version of the legislation finally rolled off the Government Printing Office presses late last month--all 1,346 pages of it--the proposed rebate had climbed to 17% of AMP. In addition, several other provisions in the draft the brand-name industry had blasted as onerous and held out faint hope of getting changed remained basically intact.

"It's crippling. It's absolutely devastating. They're going to trade off cheap drugs tomorrow for no new drugs for our children," said Eli Lilly & Co.'s chief scientific officer, Leigh Thompson. The industry figures that the Medicare rebates mean it will be giving the federal government some $2 billion to $3 billion a year in discounts. A study done by Price Waterhouse for the Pharmaceutical Manufacturers Association (Drug Topics, "Washington Wrapup," Nov. 8) had calculated that Medicaid rebates and three more recently enacted federal laws would cost pharmaceutical companies about $2.9 billion a year from 1994 to 1998. Provisions largely unchanged in the President's health-care reform bill of concern to the PMA include:

* An "antidiscount" requirement. NARD and the National Association of Chain Drug Stores view this same section as the end of "discriminatory pricing." To participate in Medicare and Medicaid, companies would have to offer the same prices to wholesalers and retailers that purchase drugs on "substantially" the same terms, including institutions.

Those terms include prompt or cash payments; volume purchases; single-site delivery; formularies; and other terms that effectively reduce manufacturers' costs. (The terms do not cover Department of Defense or Veterans Affairs, or other public programs.)

* An advisory breakthrough drug council as part of HHS. Its mission would be to judge the "reasonableness" of the launch prices of drugs that represent at least a significant advance over existing therapies. Companies could supply cost information, but apparently the council would not have the authority to obtain it without consent, as proposed in the draft. …

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