Medical Device Daily Washington Editor

WASHINGTON – At Tuesday's FDLI session on FDA/CMS collaboration, former CMS Administrator Thomas Scully offered attendees the benefit of his experience at the agency. While he did not sound any tocsins of doom during his talk, Scully did make clear that he expects reimbursement for drugs and devices to face more hurdles.

Scully said he found it difficult to prognosticate who will get the jobs at FDA and CMS, partly because cabinet-level positions will come first. In any case, he said, "it's going to be a lot more exciting than if John McCain" won the election, because Democrats have a much more ambitious healthcare agenda than Republicans. "You're going to find a lot of new energy and excitement," which he said was good because old ideas tend to grow stale.

Scully said it should be easier for Congress to vet and approve a nominee for both posts for the obvious reason that Democrats control both the White House and Congress. He also mentioned that at least part of the baggage for current FDA Commissioner Andrew von Eschenbach, MD, was that "Waxman, Dingell and Kennedy weren't going to like anyone" the Bush White House nominated for the FDA job once Les Crawford, von Eschenbach's predecessor, bailed out.

"It's not going to be fun if you're in the drug business," Scully warned. "There's going to be a complete change in attitude," largely because Democrats "are suspicious of for-profit healthcare."

He said the atmosphere in the 111th Congress may run roughly parallel to that which prevailed in the late 1990s, when Hospital Corporation of America was blown up over "a few relatively minor problems found in Florida."

On the other hand, Scully observed, "Republicans were probably too lax" in their oversight of the private sector.

Regarding Rep. Henry Waxman's move on the chairmanship of the House Energy and Commerce Committee, Scully said that "if there is a sign that Dingell is too far to the right," it strongly suggests "that President Obama, even if he chooses to govern directly from the middle, is going to have a giant weight pulling him to the left. I think the tone of the whole town as far as healthcare is going to change radically," Scully predicted.

The partisan tilt affects federal agencies, Scully suggested, remarking that "CMS is about 99.999% Democrat. He said they were very supportive" of his reforms, but he said he'd hired a lot of Democrats "to signal I wasn't going to do a lot of crazy stuff."

As for the two most conspicuous agencies at the Department of Health and Human Services, Scully said, "FDA is an incredibly balkanized place" compared to CMS, where the administrator has a lot more pull. FDA, he said, is subject more to the influence of the center directors.

These two agencies "generally don't work together," Scully said, adding that during his time as administrator of CMS, he sometimes found out about newly approved drugs from the New York Times rather than from FDA. "I said to Mark [McClellan, former FDA commissioner] from the beginning that we should get together," but McClellan was not interested.

Democrats will put "more pressure on pricing across the board," Scully said, adding that the profit margins enjoyed by device and drug makers have Congress up in arms. On the other hand, Scully made an argument that Medicare Part D, the prescription drug benefit, has truly been a success. He said the generic substitution rate in the program is 72%, and hence it comes in at 60% of projected costs. Profit margins for pharmaceutical firms are about 3% in the program, "and I don't see any way you can save money" by going to negotiated prices.

As for Medicare managed care, Scully said, "we never intended to overpay Medicare Advantage plans," adding that "in the long run, it should be like Part D" in terms of profit margins. Scully said that despite antipathy toward MA plans, he expects enrollment to stay at around 20% of all beneficiaries, mainly because pushing beneficiaries back into Part B will give them less coverage and cost them more.

Scully seemed less than optimistic on whether reform of healthcare will come quickly because there are so many different ideas of how to approach it. He said the history of such efforts also suggests that "healthcare is not a political winner."

When asked about the viability of the use of local coverage decisions to obtain reimbursement for devices in an effort to avoid close scrutiny by CMS, Scully said, "that's going to change." He pointed out that there were more than 100 contractors a decade or so ago and that next year, the number will be about 15. It will be a "much more consolidated system." The Medicare contractors "do talk to each other," Scully stated, and "if you have any significance dollar-wise, you'll get noticed."