Washington Editor

WASHINGTON - On the domestic front, Medicare legislation signed in 2003 likely will be one of the crowning achievements of the Bush administration.

But even though the $400 billion package is law, the debate to fine-tune bits and pieces of it should begin sometime soon.

Although pleased that it passed, Sharon Cohen, vice president for government relations at the Washington-based Biotechnology Industry Organization, told BioWorld Today the bill is not perfect.

"There are little things that are either items for which we need clarification or items which still need work," she said. "Anytime a big piece of legislation is passed, it doesn't mean that it's signed into law so we can wash our hands of it and move on to a totally different issue."

Cohen said there will be a series of technical corrections, clarifications or improvements.

Take, for example, drug reimbursement issues in the outpatient hospital setting and in physicians' offices. (See BioWorld Today, Jan. 31, 2003.)

Medicare reimbursement is based on an average wholesale price (AWP) set by companies that make the drugs. That is bothersome to some government officials, particularly Thomas Scully, administrator of the Centers for Medicare and Medicaid Services, who argues that AWPs often are exorbitant. (Scully resigned in early December and intends to join the law firm Alston & Bird in Washington.)

According to the Medicare reform legislation, reimbursement rates in the physician's office setting will drop from the current level of 95 percent of AWP to 85 percent. Physician's office reimbursement rates often serve as benchmarks for rates in the hospital outpatient prospective payment system (OPPS).

As the legislation stands now, the 85 percent reimbursement level in physicians' offices will be effective in 2004; in the hospital-outpatient setting, the government will set a "floor" under which reimbursement cannot fall. In 2005 and 2006, the government will implement the new system of either competitive bidding or average sales prices plus 6 percent. During 2005 and 2006, the General Accounting Office will develop a new system for drug acquisition. (See BioWorld Today, Dec. 1, 2003.)

As issues like OPPS and AWP come up for review, Cohen said she expects tweaks but not necessarily new legislation.

While Medicare reform includes a drug discount card for senior citizens, it is not expected to solve all problems for all seniors. Thus, reimportation of FDA-approved drugs from Canada remains an issue.

The new law permits reimportation of drugs - not biologics - provided Tommy Thompson, secretary of Health and Human Services, certifies that it is safe.

Otherwise, the legislation addresses generic drug access by making a few changes to Hatch-Waxman, the law approved in 1984 that essentially created the generic drug industry. Among the adjustments, Medicare reform prevents innovator or pioneer companies from "stacking" multiple 30-month extensions on patents to slow generics from entering the market.

BioShield Is Halfway There

Beyond Medicare, several other measures that impact the biotechnology industry grabbed headlines in 2003, although any legislation introduced or passed in either chamber during the first session of the 108th Congress carries over to the second session scheduled to begin in late January.

Among the highlights, the administration introduced Project BioShield, a decade-long $6 billion plan to speed development of bioterrorism countermeasures by streamlining government research, creating incentives for companies and giving the government the ability to make products available in a public emergency. (See BioWorld Today, March 28, 2003, and April 7, 2003.)

Project BioShield made it through the House last summer in a 421-2 vote, but won't get through the Senate so easily. (See BioWorld Today, July 23, 2003.)

Since countermeasures for such illnesses as anthrax or smallpox would make it through the FDA regulatory process at a swift pace without large clinical trials, companies have raised concerns about indemnity.

It's the indemnity issue, along with procurement concerns, that have kept BioShield from being passed, Cohen said.

"At the end of the day, there needs to be some rational approach to potential liability if there is to be private sector or private industry engagement," Cohen said.

Furthermore, Cohen said no business is likely to put its solvency on the line if there's no potential market, as there are for cancer or cholesterol drugs, for example.

Interpretation Of Human Organisms'

When the appropriations bill wins Senate approval in early 2004, it is expected to include an amendment that prevents the U.S. Patent and Trademark Office from issuing patents on "human organisms." (See BioWorld Today, Dec. 22, 2003.)

Introduced by Rep. David Weldon (R-Fla.) in the House, the amendment has some industry watchers on the edge as they wait to see how government officials will define human organisms.

Michael Werner, chief of policy at BIO, told BioWorld Today he has every reason to believe the amendment is meant to codify current policy practiced by the patent office that prohibits patenting of human beings and is not meant to stop a researcher from getting a patent on a stem cell process, for example.

However, there is a concern that Weldon's amendment could be interpreted more broadly.

Whatever the case, Werner said BIO officials would monitor the situation closely. But on a positive note, since the amendment it attached to the appropriations bill, it will have to be approved annually.

FDA To Require Studies For Children

The 57,000-member American Academy of Pediatrics scored a major coup in 2003 when it helped pass legislation giving the FDA authority to force drug companies to conduct clinical trials on adult drugs that are being used off label in the pediatric population. (See BioWorld Today, Nov. 21, 2003.)

Signed by President Bush, the Pediatric Research Equity Act covers all biologics and pharmaceuticals that can be used in children (for example, drugs specific to Alzheimer's disease would not be included). However, companies may request an FDA waiver or deferral under the new legislation.

In 1998, the FDA implemented something similar called the Pediatric Rule, which required companies to run trials in children. But in late 2002, the U.S. District Court for the District of Columbia overturned the rule, saying the FDA lacked sufficient statutory authority to require such studies.

Supporters of the legislation lobbied for a retroactive element so companies will be required to follow through on pediatric trials that have been on hold or have not started since the Pediatric Rule was struck down. The legislation is retroactive to April 1999.

Opponents of the legislation believe it will discourage off-label research because when companies get any indication that their products work in children, the FDA will force them to conduct pediatric trials.

The legislation includes a "sunset" provision, meaning it must be reauthorized in 2007.

BIOFIX To Repair Tax Code

A bipartisan group of congressmen in 2003 introduced BIOFIX, or the "Biotechnology Future Investment Expansion Act" (HR 2968), as a means of amending Section 382 of the tax law, which was enacted in the mid-1980s to prevent corporate fraud and abuse by penalizing companies for tax-motivated acquisitions. (See BioWorld Today, July 31, 2003.)

Multiple equity financings that are commonplace in the industry often trigger technical changes in company ownership. Under Section 382, once such an ownership change occurs, the net operating losses (NOLs) accumulated by a biotechnology company will not transfer to the purchaser. If NOLs are assigned no value, it could discourage investment in a company.

BIOFIX was introduced last year by Reps. Eric Cantor (R-Va.), Benjamin Cardin (D-Md.) and Robert Matsui (D-Calif.).

In addition to watching the progress of BIOFIX, Cohen said BIO is working with committees of jurisdiction on adjusting a problem or two at the Small Business Administration (SBA).

The SBA is leaning toward a practice of no longer awarding Small Business Innovation Research grants to companies that have venture capital funding in excess of 51 percent.