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Deficit Tremors Put Health Care Costs on Shaky Ground

BioWorld Today Washington Editor

Medicare, and the cost of health care in general, has become the epicenter in the debate over the federal deficit as the administration and Congress look for ways to control the budget.

"We have a unique opportunity to do something big . . . if we're willing to seize the moment," President Barrack Obama said at a press conference Friday. Doing that will require taking on health care spending in the Medicare program, he added.

Earlier this year, the president unveiled a strategy to contain health care costs that was dependent on $500 billion in savings in the Medicare and Medicaid programs by 2023 and an additional $1 trillion in the following decade. (See BioWorld Today, April 18, 2011.)

The question is where those "savings" would be made. In a hearing Wednesday before the House Energy & Commerce Subcommittee on Health, both Republican and Democratic lawmakers made it clear that reducing payments for physician services would be a nonstarter because such cuts would restrict health care access for Medicare recipients. And no one recommended changes in benefits or eligibility.

With other options off the table, that pretty much leaves drug and device costs. Testifying before a House Budget Committee hearing last week on Medicare and Social Security, Richard Foster, the chief actuary at the Centers for Medicare & Medicaid Services, blamed much of the increase in health care costs on industry's technological advances and people's desire to get the latest and greatest advances in treatment.

"We all want the best," he said, but "often they're pretty expensive." The reason they're expensive, he added, is that industry has had "little incentive for cost-reducing technology."

Foster expressed optimism that drug and device makers could reduce the cost of their products. "If you send a signal to R&D that things have changed," he said, "they'll get the message and turn their efforts to cost-reducing" advances in care.

Earlier this year, the FDA singled out biologics as a driver of health care costs. With an annual price tag of $15,000 to $150,000 per patient, biologics are responsible for a disproportionately high share of drug costs, the agency said in its budget justification. It expects these costs to continue to rise, given the growing number of biological products and their importance in treating disease. (See BioWorld Today, Feb. 16, 2011.)

Legislation already has been introduced in both the House and Senate to shift more of the cost of Medicare to makers of brand drugs and biologics.

Under the Medicare Drug Savings Act, H.R. 2190 and S. 1206, biopharma companies with drugs covered by Part D would be required to pay the difference between the average rebates made to private Part D drug plans and 23.1 percent of the average manufacture price. They would be subject to additional rebates if drug prices increase faster than inflation. (See BioWorld Today, June 20, 2011.)

Clearing Up Patent Extension Time Warp

With the clock ticking down on the debt ceiling deadline, the House and Senate have had little time to work out their differences on the America Invents Act, the patent reform bill that has passed both chambers. (See BioWorld Today, March 10, 2011, and June 27, 2011.)

One of those differences is a provision in H.R. 1249, but not in S. 23, that clarifies when the clock starts on the 60-day filing deadline for patent extensions.

According to H.R. 1249, the 60 days begins the date the FDA approves the drug. But if the approval is made after 4:30 p.m. ET or on a holiday or weekend, the clock is to begin the next business day.

The clarification is in line with a federal district court ruling last year in The Medicines Company v. Kappos. In that case, the judge ordered the PTO to adopt a "next business day" construction for filing patent extensions. (See BioWorld Today, Aug. 9, 2011.)

The Medicines Co., of Parsippany, N.J., sued the PTO for denying its patent-term extension application for Angiomax (bivalirudin) on the grounds that it missed the deadline. The firm received a faxed approval letter from the FDA at 6:17 p.m. on a Friday and, therefore, interpreted the 60-day rule for filing a patent extension to start the next business day, which was Monday, Dec. 18.

The PTO, however, argued that the clock started on the date the FDA notified the company of Angiomax's approval.

A number of drugmakers have been caught in the same patent extension time warp. Recently, AztraZeneca AB and Bayer Healthcare Pharmaceuticals Inc. asked the PTO to reconsider denials of their patent extension applications based on the time confusion. Both companies received their approvals after 4:30 p.m. on a Friday and assumed the clock began tolling the following Monday.

"This is an important patent filing for every medical innovator, and there shouldn't be this uncertainty," Michael Mitchell, head of global communications at The Medicines Co., told BioWorld Today.

FDA Shapes Path for Companion Diagnostics

While it's not paved in stone, the FDA has taken the first steps in laying out a tentative regulatory pathway for diagnostic tests designed to be used with specific drugs or biologics.

Although separate divisions will review the companion diagnostics and drugs, the agency plans to conduct the reviews simultaneously, according to a draft guidance released last week. Comments on the guidance are due by Sept. 10.

The FDA may approve the drug ahead of the diagnostic if it's intended to treat a serious or life-threatening disease or condition that has no available or satisfactory treatment and when the benefits outweigh the risks of not having an approved companion diagnostic.

"These proposed guidelines support the development of innovative new targeted medicines and their corresponding diagnostic tests and are intended to provide manufacturers with greater predictability," Jeffrey Shuren, director of the FDA's Center for Devices and Radiological Health, said when the draft was released.

The guidance is good news for companies like Endocyte Inc., of West Lafayette, Ind., which is developing EC20 as a companion imaging diagnostic to its EC145 cancer candidate.

Several investors had feared Endocyte's diagnostic would add another layer of regulatory risk since there was no formal approval pathway for the companion products, according to Baird Equity Research analyst Christopher Raymond.

Editor's note: Mark McCarty, Washington editor for Medical Device Daily (www.medicaldevicedaily.com), contributed to this article. MDD is BioWorld Today's sister publication covering medical technology news.

Published: July 18, 2011