Political changes in Washington create uncertainty for health reform, drug regulation, biomedical research

December 1, 2010

The new House leaders are gearing up for a vote to repeal health reform early next year. Such a move, though, is expected to be largely symbolic, as it's unlikely to pass the Senate or to override Obama's veto pen.

Key Points

While the slow pace of economic recovery and high unemployment were the top issues stirring voter discontent last month, healthcare reform emerged as a deciding factor when unhappy Americans went to the polls. With Republicans now controlling the House of Representatives, and Democrats holding a narrower majority in the Senate, Congress is expected to move to cut government spending and to repeal or revise the Affordable Care Act (ACA). The new House leaders are gearing up for a vote to repeal health reform early next year. Such a move, though, is expected to be largely symbolic, as it's unlikely to pass the Senate or to override Obama's veto pen.

Moreover, many provisions in the health reform legislation are highly popular, such as 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.

Medical product makers and health plans are anxious to extend coverage to the 30 million uninsured and recognize that 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 skyrocket.

Instead of a wholesale repeal of the 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. A fairly easy move would be to modify a cumbersome tax-reporting measure that requires businesses to file 1099 forms with the IRS for payments for goods and services worth more than $600 to any company. Insurers object to age-rating restrictions likely to raise premiums for younger, healthy populations, as well as to hefty cuts for Medicare Advantage plans.

IPAB POWER OVER PAYMENTS

A prime target for the axe for many providers is the Independent Payment Advisory Board (IPAB), which will have 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 pharmaceutical companies 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.

Congress is supposed to start funding IPAB in 2012 so that it can be up and running in 2014, but that may not happen.

Instead, Republicans will move to starve the implementation of IPAB and new health policies and programs. Rep. John Boehner (R-Ohio), slated to be the next speaker of the House, talks of cutting the federal budget by $100 billion to reach 2008 spending levels. In the process, the legislators will seek 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. Without sufficient resources, HHS may have difficulty writing needed regulations, enforcing new requirements, or helping states establish insurance exchanges.

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 will shy away from any talk of reforming social security or Medicare. The biomedical research community will object to possibly devastating reductions in funding for the National Institutes of Health (NIH), FDA, and various health and social programs. Under the Boehner plan, 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 major cuts, funding increases are unlikely.

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% January 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.

One likely result of the Republican takeover of the House is more intense scrutiny of administration policies by 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 health reform cost estimates and the impact of specific new policies on employer coverage, premiums, and benefits. The panel also plans hearings on FDA policies and which new initiatives should be added to user fee legislation, which is up for renewal in 2012.

The House Oversight and Government Reform Committee is slated to be chaired by Rep. Darrell Issa (R-Calif.), who plans to issue subpoenas to access desired government documents.

At hearings this fall on FDA's handling of Johnson & Johnson'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.

BACKING BIOSIMILARS

One of the most important provisions in the ACA for payers, pharmacy benefit managers, and the biopharmaceutical industry 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 soliciting the opinions of manufacturers, academics, pharmacy groups, and patient advocates at a 2-day public hearing last month. Most speakers agreed that biosimilars 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.

Brand-name firms, as expected, proposed a high bar for biosimilars, with extensive product characterization, comparative clinical trials, post-marketing studies, pharmacovigilance requirements, and little chance for product interchangeability. Pharma and biotech manufacturers also want biosimilars to be very distinct from innovator drugs, with unique names and codes and labeling that admittedly will limit prescribing.

Biosimilar 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 require additional testing, and biosimilars should be able to adopt the same names and codes of 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.

Generics makers are unhappy that the BPCI provides 12 years data exclusivity for innovator biologics, and they're livid over the prospect of an additional exclusivity period-or patent "evergreening"-for "next-generation" products. FDA has the difficult task of determining when changes in a product's safety, purity, or potency makes a product sufficiently distinct to warrant additional exclusivity.

Another contentious topic is whether sponsors of biosimilars can reduce the scope of clinical testing by extrapolating data from one study to additional populations or indications. The use of foreign clinical data also came up, along with discussion of whether a biotech therapy approved in Europe, but not in the United States, can serve as the reference product for FDA approval of a biosimilar.

Officials in the Center for Drug Evaluation and Research (CDER) now will weigh these statements and additional comments filed with the agency through December 31, 2010 in developing agency proposals. FDA is expected to issue guidance on many of the key issues discussed.

Many experts supported such efforts to gain more transparency and predictability for biosimilar development, while others advocated a more flexible and case-by-case approach to weighing test requirements for these products. The challenge for FDA will be to satisfy both viewpoints.

Ms Wechsler is a Washington-based reporter specializing in federal and state healthcare issues.