By Lisa Seachrist

Washington Editor

WASHINGTON ¿ Sens. Edward Kennedy (D-Mass.) and Tim Johnson (D-S.D.) introduced legislation to reduce the costs of prescription drugs for senior citizens.

The Prescription Drug Fairness for Seniors Act of 1999, S. 731, is a companion bill to a House measure, H.R. 664, introduced by Tom Allen (D-Maine). The two bills aim to provide drugs to pharmacies at the federal schedule rate for Medicare recipients.

The Senate bill raises the stakes for the biotechnology and pharmaceutical industries, which vehemently oppose the measure as a price control that will squelch innovation and create a ¿medicine deficit,¿ by preventing the development of new breakthrough medicines.

¿We had heard mixed signals from the Kennedy staff about what this legislation would look like,¿ said Jeff Trewhitt, media spokesperson for the Pharmaceutical Research and Manufacturers of America (PhRMA). ¿It is a matter of concern for us. We had hoped we had convinced [Kennedy] that government price controls were harmful to innovation.¿

S. 731 and H.R. 664 would allow pharmacies to purchase prescription drugs for Medicare beneficiaries at the same prices available to the federal government under the federal supply schedule rate which uses either a mandatory 24 percent rebate or negotiated deep discounts. Veteran¿s Administration hospitals, military hospitals and Public Health Service clinics receive medicines under this schedule.

¿No part of this bill goes undamned, from our perspective,¿ said Carl Feldbaum, president of the Biotechnology Industry Organization (BIO). ¿The very title of the bill is Orwellian. They are going to quash development with this legislation.¿

PhRMA and BIO have been arguing that the cost of research and development, which can run as high as $500 million for a single drug, makes it necessary that they achieve a certain level of profit to ensure that more drugs can be developed.

The situation is even more difficult for biotechnology companies, most of which are still in the research stage, said Feldbaum. Because these companies rely on venture capital to fund drug development, they must be able to assure their investors that there is at least the potential for a return on the investment.

Apparently, industry attempts to convey its message failed miserably, as the text of S. 731 refers to ¿the discriminatory pricing by major drug manufacturers¿ and laments the fact that ¿more than one in eight older Americans are forced to choose between buying their food and buying their medicines.¿

¿We are very dismayed to hear language like that,¿ Trewhitt said. ¿It sounds like we have a lot more work to do.¿

The introduction of the Kennedy bill comes at a time when a government study stated that Medicare will remain solvent for sixteen years ¿ seven years more than predicted a year ago. As a result, Congress may be tempted to use the issue for grandstanding during the election year. The study was released Tuesday.

¿What started out as a serious debate may turn into a political mud fight,¿ Feldbaum said. ¿The fact that Medicare may not go bankrupt as soon as was predicted may not deter Congress from enacting some legislation that would seem attractive to a large voting block, such as seniors. Alleged quick fixes like the [Allen and Kennedy bills] have become even more politically attractive.¿

Feldbaum said BIO does not object to Medicare providing a drug benefit to seniors. However, the two bills proposed by Kennedy and Allen will not accomplish the job, he said. Nowhere in either legislation does the language stipulate that pharmacies actually have to pass the discount on to Medicare beneficiaries.

Trewhitt added that the provision would put 40 percent of all prescription drugs under the federal supply schedule rate, seriously threatening innovation. In addition, Trewhitt noted that 65 percent of seniors on Medicare have supplemental insurance that provides a drug benefit. He said the 35 percent who cannot afford supplemental insurance most likely won¿t be able to afford the reduced price of the drugs called for in the bills.

¿We believe that these seniors should be eligible for federally funded premium supports for private supplemental insurance,¿ Trewhitt said. ¿We feel that we really missed a chance to reform Medicare with the failure of the Bipartisan Commission [on Medicare].¿

BIO and PhRMA have vowed to defeat this and any other price control measure.

¿We¿ve drawn a line in the sand over price controls,¿ said Feldbaum. ¿We¿re ready to fight. Although we would have preferred to have a discussion about it, it appears to be too late.¿