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Pharma industry says Obama's 2013 budget "short-sighted"

Plans to expand Medicaid rebate payments for pharma companies criticised by PhRMA

The pharmaceutical industry has raised concerns over parts of US President Barack Obama's fiscal 2013 budget, claiming that the proposals could lead to substantial job losses in the sector.

The budget seems to have been designed with a single over-arching principle in mind - to reduce the US's huge deficit by $4trn over the next 10 years - and the country's healthcare system will be affected.

Obama is proposing $364bn in cuts to Medicare, Medicaid and other health programmes over the coming decade to "make these programmes more effective and efficient and move our health system to one that rewards high-quality medicine".

The health proposals include measures to reduce the proportion paid by Medicare of unpaid co-payments and deductibles by patients from 70 per cent to 25 per cent of the total, which will save an estimated $36bn.

Cuts to post-acute care will save another $63bn, while a shift in the income threshold for payment of higher premiums will reduce federal subsidy of Medicare costs by around $28bn.

The largest savings by far however - some $156bn - will come from an expansion of the current programme in which pharma manufacturers are required to pay rebates for drugs dispensed to Medicaid beneficiaries to also include patients in the Medicare Part D (low income) plan.

Industry has a different take on the plans, with Pharmaceutical Research and Manufacturers of America (PhRMA) president and chief executive John Castellani saying that the proposed Medicare Part D mandatory rebates "are a short-sighted proposition that could destabilise the programme and threaten hundreds of thousands of American jobs".

PhRMA is also concerned about plans in the budget to reduce data protection for innovative biologic medicines, and the "overly broad powers" of the Independent Payment Advisory Board (IPAB), which was set up in 2010 with the explicit task of saving money in the Medicare programme.

The IPAB "could enact sweeping Medicare changes without Congress' oversight and which would not be subject to judicial or administrative review", said Castellani, who has previously discussed PhRMA's desire to have the group disbanded.

Away from health spending, there are also concerns about a decision to hold the budget for the US National Institutes of Health (NIH) at $30.86bn, with Research!America chair John Edward Porter warning that a "freeze" on investments in biomedical research would have disastrous consequences as "global competition intensifies".

"Congress needs to do the hard work of tax and entitlement reform while protecting investments that make absolute sense for our country," he added.

The FDA was one beneficiary in Obama's plans, with a 17 per cent increase in budget to $4.49bn thanks in part to the introduction of user fees for generic and biosimilar drugs.

Some of that increase is intended to help bolster FDA's oversight of overseas production sites for medical products imported into the US, particularly in China.

In his address to introduce the budget proposals, Obama acknowledged that the measures would not be welcomed in some areas.

"I'm proposing some difficult cuts that, frankly, I wouldn't normally make if they weren't absolutely necessary.  But they are," he said.

The truth is we're going to have to make some tough choices in order to put this country back on a more sustainable fiscal path."

17th February 2012


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