WASHINGTON _ Several drug manufacturers andhealth purchasing groups are lobbying Congress to blockan extension of discount federal drug pricing rules topublic hospitals, charging that a general disruption ofdrug prices could result.

Congress is under considerable pressure from a numberof industries, not just pharmaceutical makers, to scrap thepricing program. At issue is a 1994 law that extends to allgovernmental organizations, including public hospitals,access to the Federal Supply Schedules, cut-rate prices formany commodities including pharmaceutical drugs andmedical devices.

Section 1555 of the Federal Acquisition Streamlining Actof 1994 (PL 103-355) gives the General ServicesAdministration (GSA) the discretion to expand access tofederal pricing schedules to certain non-federalgovernmental entities, including public hospitals andhealth clinics.

An amendment to place a moratorium on implementingthe 1994 law already has passed the House. By voicevote, the House on Sept. 14, 1995, passed the FederalAcquisition Reform Act of 1995, (HR 1670). The House-passed amendment prevents the GSA from implementingSection 1555 for one year while a study is conducted todetermine the impact of extending the pricing policies tostate and local governments.

The amendment was backed by the Health IndustryGroup Purchasing Association, Health IndustryManufacturers Association and a number of drug makers.A suitable legislative vehicle is now being sought in theSenate to which to attach a provision to repeal Section1555 of the 1994 law.

GSA has not decided whether to grant public hospitalsaccess to the reduced federal prices.

"The 1994 statute just went into effect on Oct. 1, 1995,"said Ida Ustad, GSA associate administrator foracquisitions policy. "We have not yet made a decisionwhether to put in place the mechanisms for state and localpublic hospitals to apply to use the federal schedules. Wehave been told by the Veterans Administration, whichunder a delegation of authority from the GSA operates thepricing schedules, that extending the pricing scheduleswould have a detrimental effect on federal agencies."

The purchasing alliances and drug manufacturers wantGSA precluded from putting pharmaceuticals andmedical products on the federal pricing schedules whichthey say would extend discount pricing to more than one-third of the U.S. market for drugs and devices.

"We still think there is a possibility that the GSA couldput these prices into effect for public hospitals. The dooris still open," explained Jeff Trewhitt, a spokesman forthe Pharmaceutical Research and Manufacturers ofAmerica (PhRMA).

PhRMA does not want to disrupt the current system ofgroup purchasing whereby hospitals negotiate discountsfrom drug makers through group purchasingorganizations, said Trewhitt. Under a common grouppurchasing discount, Neupogen, manufactured byThousand Oaks, Calif.-based Amgen Inc. would cost$1,150 for 10 one-milliliter vials of a 300 microgramsolution. Under the federal pricing schedule, theNeupogen price could fall to as low as $852.

The purchasing groups see the extension of the federalpricing policies as "a gross duplication of the privatesector," said Robert Betz, executive director of the HealthIndustry Group Purchasing Association, in an interviewwith BioWorld Today.

"We see this as putting the federal government in directcompetition with the private sector," Betz said. "There isno indication that there has been a market failurenecessitating government intervention."

Backing the expansion of the federal pricing rules are thenation's public hospitals which are under increasingpressure in a managed care environment to remainfinancially viable. n

-- Michele L. Robinson Washington Editor

(c) 1997 American Health Consultants. All rights reserved.