Obama budget provides a mixed bag for health care

President Barack Obama sent his $3.8 trillion budget proposal to Congress on April 10, and the plan includes a number of provisions designed to cut spending on health care and promote health and wellness.

Overall, the budget is something of a mixed bag for the healthcare industry. While it would provide incentives for expanding the use of generic drugs, for example, it would also cut spending on Medicaid that have drawn opposition from pharmacy retailers, and even generic drug makers disagree with some of its provisions for that industry.

Studies have shown that increasing the use of generic drugs saves the country's healthcare system money - lots of it. According to a report commissioned by the Generic Pharmaceutical Association and conducted by IMS Health, use of generics saved the country more than $1 trillion between 2002 and 2011.

As such, the president's budget calls for greater use of generics and biosimilars, including a provision that would ban the biosimilar "carve-out" laws that have been going through state legislatures lately, laws that would allow a physician to prevent substitution of a biosimilar for a branded biologic. Those laws have won praise from the biotechnology industry, while generic drug makers have criticized them. In March, Virginia Gov. Bob McDonnell became the first governor to sign such a bill, but the bill contains a sunset clause that will cause it to expire after five years, likely before biosimilars start hitting the market in any appreciable way.

In addition, the bill proposes to ban so-called "pay-for-delay" patent settlements between branded and generic drug companies. Under such settlements, a generic drug company trying to get the patent on a branded drug thrown out by applying for Food and Drug Administration of its product before the patent expires will settle with the branded drug's manufacturer by agreeing to hold off product launch, in exchange for some consideration by the other company, which can come in the form of cash payment or an agreement not to launch the branded drug under its generic name at a reduced price, also known as an authorized generic. Generic and branded drug companies have pointed out that these deals always result in generic drugs reaching the market ahead of patent expiration, often months or years before, but opponents — including the Federal Trade Commission — charge that they keep drugs out of patients' hands for too long, citing studies that they cost the healthcare system up to $3.5 billion annually, but drug makers say those studies are out of date. Ultimately, it may be the Supreme Court that decides whether such deals are permissible; the court last month heard the case of FTC v. Actavis.

Meanwhile, proposed cuts to Medicaid have drawn the ire of retail pharmacy groups, including the National Association and Chain Drug Stores and the National Community Pharmacists Association. In an open letter to the Centers for Medicare and Medicaid Services, NACDS president and CEO Steve Anderson and NCPA CEO B. Douglas Hoey expressed their opposition, saying the cuts could threaten healthcare delivery. "While the goal of this provision may be to decrease Medicaid costs, we believe it may in fact reduce access to prescription drugs and pharmacy services for Medicaid patients, resulting in increased overall healthcare expenditures," Anderson and Hoey wrote.

As Anderson and Hoey wrote, pharmacy - as the most accessible part of the healthcare system — provides a number of vital means of lowering overall healthcare costs, such as medication therapy management, which reduces costs by increasing medication adherence and ensuring that patients take their drugs as prescribed. According to the New England Healthcare Insitute, poor medication adherence costs the country $290 billion per year due to consequences to patients' health, such as hospitalizations. Given that, measures that would reduce patients' access to pharmacy services come across as less like fiscal conservatism than like eating the seed corn.

Efforts to curb smoking are getting attention as well, as the budget seeks to raise the tax on cigarettes — currently at $1.01 per pack — by 94 cents and use the $78.1 billion the Office of Management and Budget estimates it would add to the federal government's coffers over the next decade to fund early childhood education. A study by the Congressional Budget Office found that increasing tobacco taxes by 50 cents would prompt nearly 1.4 million adults to quit smoking by 2021, though tobacco companies have opposed the proposal, saying it would target low- to middle-income consumers.

 

Comments

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