The U.S. House of Representatives passed two spending packages that boosted funds for both the FDA and the NIH, but device and generic drug makers saw other benefits. The House legislation would allow makers of biosimilars and generic drugs to sue brand names for blocking access to the index article, but also repealed the medical device tax, a change that would bolster development of the novel therapies that are the industry’s lifeline.
Both spending bills carry numerous provisions related to the health care economy and will go to the Senate for passage, hopefully before the government runs out of money Dec. 20. The bills encompass $1.4 trillion in federal government spending and would wrap up any spending concerns related to the fiscal 2020 cycle, assuming the Senate agrees to the legislation and President Trump concurs.
Device tax suspension soon to expire
The 2.3% tax on medical devices was part of the Affordable Care Act but was not in force in the previous four years due to congressional intervention. The latest suspension is set to expire at the end of the current calendar year, and device makers have warned that the reimposition of the tax would disproportionately affect the smaller companies that provide most of the groundbreaking devices.
Device makers immediately sounded off on the news of the passage of the House legislation, with Mark Leahey, president and CEO of the Medical Device Manufacturers Association calling the passage “a tremendous victory for the tens of millions of patients who rely on the cures and therapies provided by our industry every day.” Leahey also said, “thanks to the collective passion of a broad coalition of stakeholders, today this punitive policy is set to be repealed once and for all.”
Scott Whitaker, president and CEO of the Advanced Medical Technology Association, said the House vote “is a huge win for American patients,” adding that device makers can now “focus on developing the next generation of treatments and cures.” Whitaker added, “we look forward to the Senate’s vote and are confident it will send this important legislation on to the President for his signature.”
Also on the chopping block with the medical device tax is the so-called Cadillac tax, a 40% hit on employer-sponsored, premium health plans that was intended to discourage excess health care spending by enrollees in those plans. The House of Representatives had voted 419-6 in July to repeal the Cadillac tax, and legislation has been making the rounds to repeal the health insurance tax as well. That tax, like the Cadillac and device taxes, was part of the Affordable Care Act (ACA).
The device tax was generally predicted to bring in more than $2 billion a year, while the health insurance tax was expected to bring in $150 billion to $200 billion over 10 years. The loss of the Cadillac tax is generally pegged at roughly another $200 billion, making the loss of these three revenue streams a substantial hit to the ACA’s funding provisions.
Spending at the NIH would be boosted by $2.6 billion under the terms of the House legislation, bringing the total to slightly less than $42 billion for fiscal 2020. Of that sum, $50 million would go toward President Trump’s Childhood Cancer Data initiative, while the All of Us program would receive $500 million. The Brain Research through Advancing Innovative Neurotechnologies, or BRAIN Initiative, would likewise receive $500 million, while the Cancer Moonshot program would take in $195 million.
The FDA would receive an increase of $91 million in discretionary monies, bringing that figure to $3.16 billion, not including user fees. That sum falls toward the low end of the difference between the figures proposed by the House and Senate earlier this year. The House had offered to boost FDA monies by about $184 while the Senate’s offer was a relatively meager increase of $80 million.
CREATES Act would save $3.7B
The legislation encodes the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act, which has the backing of Senate Finance Committee chairman Chuck Grassley (R-Iowa) and Senate Appropriations Committee chairman Pat Leahy (D-Vt.). The legislation debuted in the 115th Congress but struggled to move past committee action in 2018.
Grassley and Leahy said in a Dec. 16 statement that their constituents had complained about the cost of drugs and biotech products, but also noted that the Congressional Budget Office calculated that the change would shave $3.7 billion off the federal deficit over 10 years.
The legislation adds a tweak of considerable interest for the pharmaceutical industry in that it would give brand-name drug makers 12 years of marketing exclusivity for drugs that are manufactured from synthesized polypeptides. Section 605 of H.R. 1865 would amend the Public Health Service Act by removing the exclusion for chemically synthesized polypeptides from the definition of a biologic. This provision would effectively expand conventional drug exclusivity another seven years from the five currently enjoyed by the affected pharmaceuticals.