The trickle of leak drafts of the president's health-care planhas turned into a steady flow, and the latest permutation,dated Sept. 9 and dubbed "Working Group Draft: Privileged andConfidential," has mostly bad news for both pharmaceutical andbiotechnology companies, several experts agreed.

The draft plan proposes expanded powers for the secretary ofHealth and Human Services (HHS) over drug prescriptionpractices, required rebates from companies for Medicare andMedicaid drugs and the establishment of a national healthboard that could blow the whistle on overpriced drugs.

The HHS secretary will have the authority to set maximumquantities per prescription of any given drug -- and limit thenumber of refills -- as well as the power to require doctors orpharmacists to obtain "prior authorization," in the jargon ofmanaged care, for certain prescriptions. Drugs requiringgovernment approval would include those subject to misuse orinappropriate use, or ones the HHS secretary deems non-costeffective.

In the new plan, the Health Care Financing Administration(HCFA) will require rebates of 15 percent from companieswhose drugs are paid for under Medicare and Medicaid.Medicare and Medicaid represent about half of the market fordrugs. In addition, the HHS secretary may negotiate additionalrebates from companies whose drugs cost too much, in herjudgment.

Finally, a national health board, which has appeared inprevious health-care plan documents, will retain the right totattle publicly on companies with pricey drugs.

Industry insiders and observers critiqued various elements ofthe plan almost immediately.

Lisa Raines, vice president for government affairs at Genzyme,voiced concerns about the draft proposal's limits on drugprescriptions. "Some patients may require larger doses thanothers. It would be troubling if those patients didn't get thequantity of product they need because Medicare was trying tosave money," said Raines.

She called the proposed rules concerning prior authorization"ironic" in light of the Clinton administration's oft-stated desireto reduces paperwork and bureaucracy in the health-caresystem.

One industry observer told BioWorld that the clause giving theHHS secretary power to negotiate additional rebates fromcompanies could scare investors from financing breakthroughdrugs.

Another industry insider called the required rebate program "aspecial category of government price controls that doesn't existfor any other medical technology."

The plan did receive some lukewarm praise yesterday. Onepositive thing, said Raines, is that coverage under Medicare willextend beyond FDA-approved indications to off-label uses thathave wide acceptance among doctors. Additionally, theindustry observer pointed out that the national health boardwould attempt to objectively compare outcomes of differenttreatments for the same conditions -- an effort that could"rationalize medicine."

But Princeton University health-care economist Uwe Reinhardtvoiced a far-reaching criticism of the health-care plan. "Thethreat to the biotechnology industry comes less from thegovernment than from the private megabuyers," he said. Undercapitation, he explained, "an HMO looks for the cheapestproduct. Those private megabuyers are not likely to want tounderwrite R&D."

Moreover, the health-care plan sets the stage for globalbudgeting. "I have always argued that Jackson Hole (the groupof health-care specialists whose model Clinton used as the basisfor his program) is a platform for global budgets," saidReinhardt. "If you have a fee for service system, it's almostimpossible to budget top down. You can control price, but it'salmost impossible to control volume. (Under capitation) thegovernment can say, whatever (the price) was last year, it canonly rise by five percent this year. The minute you've donethat, you've budgeted the system globally."

Reinhardt says a Canadian- or German-style national healthplan would have been healthier for biotechnology because bothincorporate fees for service.

Nonetheless, Reinhardt thinks Clinton designed the health-careplan cleverly by taking the path of least resistance. "Theprivate sector had already moved in that direction, pushingpeople into HMOs," he said.

Moreover, "This is essentially a Republican design with a fewDemocratic instruments of torture, like budgets that can beturned on and off, said Reinhardt. "That's why Chafee and Dolehave been so muted. They've been hoisted by their own petardwith Clinton."

-- David C. Holzman Washington Editor

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