The latest version of the president's health-care reformpackage, the 1342-page Health Security Act, was releasedWednesday and met with immediate howls of protest from thebiotech community.

The plan contains a different version of a provision that, in itslast incarnation, would have allowed the secretary of Healthand Human Services (HHS) to blacklist a given breakthroughdrug from Medicare reimbursement if a specially constituted"breakthrough drug committee" determined its cost to beexcessive.

Currently, the secretary retains the power to blacklist, but on adifferent basis from the breakthrough drug committeeUsdeterminations of excessive cost. In both the old and newversions, drug manufacturers must pay rebates to thegovernment on Medicare reimbursements of their drugs. RIfthe secretary is unable to negotiate I an acceptable rebate,Sthen she can blacklist, according to the Health Security Act.

For new drugs (marketed after June 30, 1993), the latitude forsetting the size of the rebate is now much wider than under theold version of the health-care plan, in which it was set at 15percent of Medicare reimbursement. The rebate can be as greatas the difference between the average manufacturer retailprice and the drugUs cost to wholesalers in certain foreigncountries as specified within the Food, Drug and Cosmetic Act.And nothing in the Health Security Act suggests that themanufacturer has rights or recourse in the matter.

"It's not clear that the limit on rebates is a meaningful limit,"Lisa Raines, vice president for government affairs at GenzymeCorp., told BioWorld, "because it's comparing retail prices in theU.S. with wholesale prices overseas."

Furthermore, "this threatens to blacklist all new drugs, not justbreakthrough drugs, so it's even broader than the oldblacklisting proposal," she said.

As for the old breakthrough drug committee -- now called theAdvisory Council on Breakthrough Drugs -- its forum to tattleon pricey drugs is now restricted to publishing its findings inthe Federal Register.

But the criteria for analyzing launch prices demonstrate that"the authors do not understand the nature of the risk involvedin developing breakthrough drugs, and the fact that investorsexpect to be rewarded commensurately for that risk," saidRaines.

"Even when they are talking about the cost to develop a drug,they don't recognize that five other drugs in your pipelinemight have failed," she added.

The criteria to be used by the advisory council to make itsdetermination about the fair pricing of a new drug includeprices of related drugs, cost information supplied by themanufacturer, prices in certain foreign countries, projectedprescription volume, economies of scale, research costs andother costs.

Raines said the Health Security Act as drafted would steer theindustry away from breakthrough drugs and toward generics,"because there is no (Medicare) rebate for generic drugs. Thereis no advisory committee second-guessing your prices."

The end result, she said, is a "proposal (that) would essentiallyfreeze the current state-of-the-art in medicine and notencourage technical advances that would improve patienthealth and reduce costs."

Carl Feldbaum, president of the Biotechnology IndustryOrganization (BIO), faxed out a statement reiterating his group'sopposition to the two offending components of the HealthSecurity Act. "The administration doesnUt appear to understandhow jobs are created in this economy and how governmentintervention in the free market undermines AmericaUsleadership role in biotechnology," he said.

One source of confusion for readers of the massive health-caredocument was two differing descriptions of the breakthroughdrug committee that were incorrectly labeled. A fewbiotechnology and Capitol Hill sources who had begun to porethrough the tome told BioWorld they were confused about thetwo breakthrough drug bodies, as did a researcher in theadministration's "Health-Care War Room."

Melissa Schofield, deputy assistant secretary for public affairsat HHS, verified Raines' suggestion that, in their haste to releasethe document, the drafters had failed to completely pull thetext that described the old breakthrough drug committee.

-- David C. Holzman Washington Editor

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