WASHINGTON _ Pharmaceutical and biotechnology industryadvocates spent much of last weekend poring over the fine print of thehealth care bill introduced by Senate Majority Leader George Mitchell(D-Maine) last Tuesday. The focus of their attention: the 91 pages ofthe 1,410-page bill that describe the new Medicare outpatientprescription drug benefit.All the scrutiny turned up at least two new legislative targets for thebiotechnology industry to take aim at. The first is a flat 15 percentmanufacturers' rebate requirement for Medicare drugs purchased undera fee-for-service benefit delivery program.The Mitchell bill provides three delivery mechanisms for the drugbenefit: a fee-for-service plan, a Prescription Benefits Managementoption and a Health Maintenance Organization option _ all effectiveJan. 1, 1999. Drug manufacturers would sign a flat 15 percent rebateagreement with the Department of Health and Human Services (HHS)in exchange for no formulary (a restricted list of drugs) under the fee-for-service option."A flat rebate represents a tax on our companies who have products onthe market," said Carl Feldbaum, president of the BiotechnologyIndustry Organization (BIO). "The question you have to ask is, doesthat encourage innovation? The answer is no."Previously, the industry opposed a provision that would have allowedthe Secretary of HHS to negotiate unlimited rebates for breakthroughdrugs _ or new drugs that face no market competition. Although that"onerous" element did not appear in the Mitchell bill, thebiotechnology industry has stepped up its criticism of any rebates at all.Rebates are viewed by some legislators as the only means forcontaining costs once Medicare is expanded to include a prescriptiondrug benefit.The second Mitchell bill provision that drew criticism from industryexperts on Monday is relatively obscure, yet it could shave 15 percentoff Amgen Inc.'s sales of erythropoietin (EPO) and 3 percent off ofGenzyme Corp.'s sales of Ceredase. It is known, for lack of a betternickname, as the "incident to" provision.Currently, drugs administered "incident to" a physician's services(namely injectables and infusables that involve weight-calibrateddosing done in a doctor's office) are 100 percent reimbursed underMedicare, with no required manufacturers' rebates.Under Mitchell's bill, coverage for such drugs would shift into the newMedicare outpatient prescription drug program which requires thatmanufacturers offer the government a flat 15 percent rebate on drugprices. EPO, Ceredase, immunosuppressives, oral cancer drugs,osteoporosis drugs and Factor VIII would all be newly subjected to the15 percent rebate under Mitchell's plan.Amgen Stands To LoseAll sales of EPO, a red-blood-cell stimulant approved in 1989 to treatend-stage renal dialysis, are reimbursed by the federal governmentthrough the Medicare program. About 13 percent of Ceredase sales arereimbursed through Medicare. Thus the "incident to" provisionrepresents about a $75 million hit for Amgen (15 percent of 1993 EPOsales of $500 million) and a $2.5 million hit for Genzyme (15 percentof $16 million, which is 13 percent of total 1993 Ceredase sales of$125 million).Under Mitchell's bill, the "incident to" provision would not take effectuntil 1999. Nonetheless, industry advocates complained that it woulddisproportionately impact biotech drug sales since most biologics,particularly proteins, are delivered by physicians in weight-adjusteddoses."For biotechnology, the Mitchell bill is worse than the Clintonbill,"Peter Teeley, vice president of government and public relations atAmgen, told BioWorld. "There's enough in (Mitchell's bill) to giveeverybody indigestion."Teeley said he fully anticipated that the Mitchell bill would contain the"incident to" provision and flat rebate requirements. Mitchell's officeinformed Teeley earlier this summer that vocal drug industry critic Sen.David Pryor (D-Ark.) drafted the Medicare outpatient prescription drugbenefit language in the bill.Floor debate on Mitchell's bill begins today and it is widely expectedto be a partisan brawl. Leading Republican senators, including PhilGramm (Texas) and Arlen Specter (Pennsylvania), raised thepossibility of a filibuster on Monday and Democratic defectionscontinued over the weekend, notably Bob Kerrey (Nebraska).According to Teeley, Pryor will introduce amendments to Mitchell'sbill this week in an attempt to insert a Medicare drug blacklistingprovision and a unitary pricing provision (allowing retail pharmaciststo obtain rebates equal to those given Medicare). Senators friendly tothe industry are expected to offer amendments to delete the "incidentto" provision and the 15 percent rebate requirement. n

-- Lisa Piercey Washington Editor

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