WASHINGTON _ The Republican plan to shiftMedicare beneficiaries to managed care plans now beingso hotly debated in Congress will be a mixed blessing forbiotechnology companies. While shifting seniors out oftraditional fee-for-service health insurance into managedcare plans could increase coverage for prescription drugs,these care plans may construct high entrance hurdles fornew drugs to be accepted into their practice styles.

Similar bills to transform Medicare into a more cost-effective health care plan have been introduced in theHouse and Senate. The bills are part of the budgetreconciliation process which could continue for months.

Shifting millions of seniors into managed care also willincrease the clout of managed care which now controlsmost employer-based health insurance markets.

And perhaps most troublesome for biotech companiesand their patients, is the prospect that managed care firmsmay elect not to cover an expensive new therapy thatpromises to forestall or prevent serious complications orsurgical treatments simply to keep costs under control.

Several biotech drugs currently are covered by Medicareby virtue of their site of delivery, noted Lisa Raines,Genzyme Corp.'s vice president of government relations."Because most biotech drugs are injectables, they areadministered either in physicians' offices or hospitals."Under Medicare's current payment rules, the cost of adrug is bundled in a hospital's prospectively set payment.Drugs administered in an outpatient setting are paid foron the basis of what Medicare calls reasonable costs.

"If a drug manufacturer today develops a drug to preventAlzheimer's disease and the corresponding millions ofdollars in institutional costs, Medicare wouldn't pay for itbecause current law prohibits coverage of self-administered drugs," Raines said.

Restrictions on coverage based on who administers a drugis the reason Emeryville, Calif.- based Chiron Corp.'sBetaseron is not covered by Medicare, Raines said.However, if Congress makes it easier for seniors to joinmanaged care plans, many with multiple sclerosis may goshopping for a plan that includes Betaseron _ arecombinant form of beta interferon _in its formulary,she said.

If Congress cuts the Medicare payments to hospitals,some drug therapies could be eliminated as hospitalsattempt to bring utilization in line with Medicarereimbursement. "We are worried that we could take a hitif Medicare hospital payments are further reduced," saidJeff Trewhitt, a spokesman for the PharmaceuticalResearch and Manufacturers of America.

HMOs May Entice Seniors With Better Drug Benefits

Managed care plans seeking out Medicare beneficiariesmay offer better drug coverage than the one Medicarenow offers. "Many health maintenance organizations[HMO] may offer seniors an enhanced prescription drugbenefit to attract them to move from fee-for-service into amanaged care plan," Raines told BioWorld Today.

Many managed care plans are offering a better benefitpackage for two reasons. "The conventional wisdom isthat managed care plans actually do manage the deliveryof health services, giving them the latitude to enhancebenefits by offering durable medical equipment and someprescription coverage that Medicare usually does notoffer," said Raines.

And this also assumes that HMOs will continue to enjoythe lucrative payment from Medicare that enables them toadd additional benefits.

Drug formularies maintained by HMOs to standardizetherapy and obtain the best price from vendors could posesignificant hurdles for biotech firms. "Most formulariesnow seek to control the use of two or threeinterchangeable drugs. However, some formularies totallyprohibit use of growth hormones as a class of drugs," saidRaines.

This wholesale exclusion of growth hormones promptedsome biotech makers to lobby for an amendment to lastyear's health reform plan sought by the Clintonadministration to prohibit HMOs from excluding anentire class of drugs from the formulary. "Becausebiotech drugs are literally in a class by themselves, thislanguage would have prevented HMOs from excludingclasses of biotech drugs," said Raines.

Penny Wise, Pound Foolish

Many biotech companies legitimately fear that managedcare plans may be "penny wise and pound foolish" whenmaking coverage determinations about biotech drugs thatsometimes run in the six figures.

Raines used the example of Cambridge, Mass.-basedGenzyme's Seprafilm now being tested to see if iteffectively reduces surgical adhesions. "Managed carefirms may balk at the $200 price tag for the drug. Butisn't it cost effective to prevent another surgicalprocedure?" asked Raines. "Even if the drug works only 1percent of the time, the managed care plan can run thenumbers and determine if including this drug in thebenefits package would be cost effective."

Genetic testing runs the same risk of being deniedinclusion within an HMO's benefit plan because its pay-off may be several years away. A screening test will be onthe market in a few years that will help young womencorrectly identify themselves as osteoporosis patients 30years hence.

"That information would be invaluable to help themmodify their diet and increase exercise in order to buildbone mass," said Raines. "But an HMO may decide toexclude such a test from the benefit plan in hopes thatsuch a patient would be enrolled in another insuranceplan when she develops the disease." n

-- Michele L. Robinson Washington Editor

(c) 1997 American Health Consultants. All rights reserved.