By Kim Coghill
Less than two months before the presidential election, prescription drug coverage for seniors has emerged as one of the hot-buttons of the 2000 campaign. Though they differ on key details, George W. Bush and Al Gore have each unveiled Medicare modernization proposals that would help seniors pay for prescription drugs.
The Biotechnology Industry Organization is eyeing the proposals warily, expressing support for a plan that can provide seniors with access to affordable coverage - but only if it doesn't come with government-forced price controls.
Bush has proposed spending $158 billion on a private-sector-based prescription plan that will funnel Medicare funding through the states. The $253 billion Gore plan would be federally based, giving Medicare control of administration.
BIO does not endorse candidates, but is working to make sure both sides are aware of the industry's point of view. In late August, the organization sent letters to both candidates urging them to tell voters how their plans will help seniors gain access to prescription drugs and how those plans will encourage innovative drug development.
Bush's proposal gives seniors a choice in their health-care plans, while under Gore's, seniors will be covered by a government HMO. Industry insiders fear Gore's plan will make the government the largest purchaser of prescription drugs and lead to government-controlled prices.
"A price control, whether real or perceived, might dampen the enthusiasm for investing in a biotech company developing innovative products," said Paul Abrams, CEO of Seattle-based NeoRx Corp. "One has only to remember what happened to the biotech industry in the spring of 1994.
"The mere threat of price controls by the President's health-care task force dried up biotech venture capital. The discussions of price-control boards for innovative products forced 13 out of 16 companies to withdraw their initial public offerings (IPOs) of stock and their efforts to go public."
But so far this year, media attention focusing on the issue has not had a dramatic impact on the stock market.
"There's been a bit of a wait on the big cap market," said Tim Coan, analyst with ING Barings LLC in New York. "But it has been good for the generics."
Peter Drake, managing director of Prudential Vector Healthcare in Deerfield, Ill., said biotech stocks have not been affected, but the drug stocks have dropped a little.
He said none of the firm's clients has voiced any concerns about biotechnology, probably because "the Democrats and Republicans are taking greater aim at the pharmaceutical companies."
But if the biotechnology stocks are affected, "you probably won't notice it until mid-October."
One problem with price controls is that they don't take into account the cost of research and development, said Jeff Trewhitt, spokesman for Pharmaceutical Research and Manufacturers of America (PhRMA). In 20 years, PhRMA members' R&D spending has increased from about $2 billion annually to an anticipated $26.5 billion this year.
Trewhitt says PhRMA opposes Gore's plan because it keeps in place a government-controlled program that operates under a "one-size-fits-all approach," as opposed to giving patients a choice.
PhRMA has not publicly endorsed Bush's plan and Trewhitt would not comment on whether they would.
Carl Feldbaum, BIO president, said the Bush plan creates some concern as well, because it authorizes block grants and allows states to set their own policies. "There is a great deal that may happen," he said. "No one knows what the states would pass."
The biotech industry can offer seniors innovative drugs, but, at the same time, is vulnerable to a political quick fix on Medicare, Feldbaum said.
Abrams echoed this sentiment in testimony before Congress this summer. "We must be certain," he said, "that the most life-enhancing and cost-effective therapies for seniors and breakthrough products for diseases such as cancer, osteoporosis, Alzheimer's disease, Parkinson's disease, diabetes, heart disease, stroke, Lou Gehrig's disease and others that are currently being researched and developed by biotechnology companies do not become the unintended victims of well-intentioned, but inappropriate solutions to that problem."
Both the Bush and Gore proposals include stop-loss benefits, which provide medicines for seniors when they are the sickest and their bills are the highest. Under Gore's plan, Medicare would pay prescription costs beyond $4,000 annually; Bush's proposal sets the threshold at $6,000. But according to an American Association of Retired Persons survey, 95 percent of seniors spend less than $3,500 a year on prescription drugs.
BIO industry experts say any prescription drug plan needs to provide stop-loss insurance coverage, which is generally not subject to lifetime or annual caps, co-pays and deductibles after a specified level of out-of-pocket spending. Coverage would provide Medicare beneficiaries with protection against the substantial prescription drug costs usually seen in breakthrough drugs or chronic disease treatment.
BIO further recommends that the federal government consider three essential points in discussions on Medicare reform:
¿ Small biotech companies, many of whom are years away from having commercial sales, are in the forefront of discovering, developing and bringing to market the next generation of life-saving medicines. Many drugs they are developing are targeted at preventing or curing diseases that affect seniors.
¿ Increasing seniors' access to prescription drugs through fiscally responsible, decentralized, private-sector coverage is the best way to help seniors access drugs that are safe and affordable.
¿ Price controls could dry up investment in the industry.