As more high-cost biologic drugs become part of standard care, the FDA has been under pressure to devise a way to allow generic versions of biologics to reach the market. Although competing industry interests have made it difficult for the agency and Congress to agree on such an approach, 2008 may be the year when that changes.

On February 4, President Bush presented his budget for the fiscal year beginning October 1. To the surprise of most who follow industry developments, the budget includes a plan to give the FDA new authority to handle applications for generic biologics. That same day, John Dyer, FDA chief operating officer, said that the agency was drafting legislation to submit to Congress.

Almost immediately, the FDA backtracked on Dyer’s statement, saying that the Bush administration is committed to the concept of the FDA’s establishing an approval process for generic biologics but that the FDA would not draft its own bill. Then, at a Senate Finance Committee hearing on February 6, HHS Secretary Michael O. Leavitt said that FDA Commissioner Andrew C. von Eschenbach, MD, and Sen Charles E. Schumer (D, NY), chief sponsor of legislation on the issue, would work out a compromise bill together. “This seems to me to be a better approach, if we could reach an agreement,” Leavitt explained.

Among the most difficult issues to resolve are how long manufacturers of brand-name biologic products should have market exclusivity-Schumer advocates 12 years, whereas the Biotechnology Industry Organization wants 14 years-and whether the FDA should have the authority to allow interchangeability of brand-name and generic versions of a biologic product, even though they are not identical in the way brand-name and generic nonbiologic drugs are.

The FDA budget for the next fiscal year also includes, for the first time, user fees to be paid by manufacturers of generic drugs for speedier handling of their applications. The budget calls for the FDA to receive $17.4 million in the next year from the user fees. While the major biotech companies support the concept, “opposition from smaller industry players makes this provision an uphill battle with Congress,” notes industry analyst Paul Heldman of Citibank.

MA Sales Ploys Face New Curbs

A host of new rules governing the sales of Medicare Advantage (MA) plans are likely to be included in a new legislative proposal being developed by Sen Max Baucus (D, Mont), chairman of the Finance Committee. He is aiming for an April markup of the bill.

While the Centers for Medicare & Medicaid Services (CMS) and America’s Health Insurance Plans (AHIP) consider the new legislative curbs to be unnecessary, all sides agreed that there have been abuses in selling the managed care plans to seniors. At Baucus’s February 7 hearings on the issue, Patrick O’Toole, vice president of Medicare sales at Humana, said that during the past 2 years, the company has dismissed close to 150 agents for improper marketing practices and has started moving away from using outside sales agents. “In 2007, we reduced the number of delegated agents selling our products by 43% and reduced the number of contracted general agencies by 29%,” he explained. Michael McRaith, director, Illinois Division of Insurance, testified that agents frequently use pressure tactics to sell MA plans and mislead prospective customers about what their out-of-pocket costs will be and which physicians are in the plan’s provider network.

Baucus’s proposals would end exclusive oversight of MA plans by CMS and give the states the authority to go after deceptive sales practices. It would also ban door-to-door sales of MA plans, forbid agents from representing themselves as agents of Medicare, stop plans from using call centers to pinpoint leads for their sales personnel, and outlaw commission schedules tied to the number of enrollees a salesperson signs up.

The Bush administration is expected to oppose the curbs, arguing that both new sales standards developed by AHIP and regulations CMS has recently put into place-such as requiring plans to call new MA enrollees and make sure they understand that they have opted out of traditional Medicare-are already addressing the problem.

CMS Is Tweaking Part D Rules for 2009

The draft of the rules set by CMS for health plans that want to offer Part D coverage next year suggests that the agency will be more active in monitoring plan pricing deals and providing beneficiaries with information about plan performance. The final version of the "call letter" asking for 2009 bids is scheduled to be released on March 15.

For the first time, CMS is demanding that Part D plans require their subcontractors to agree to let government auditors inspect all their records related to the program, “including rebate and other price concessions information.” Another new mandate calls for plans to begin reporting the percentage of prescriptions filled immediately rather than the percentage being held for prior authorization or a coverage exception process. Also new is a demand that plans post on their Web sites the criteria they use in deciding when a drug needs prior authorization.

Perhaps as important as the proposed changes are the aspects of Part D plans that CMS has indicated it is not altering. With one exception, it is not revising its policy on the 6 categories of drugs that must be included in all formularies. The exception is that the formularies must now include “all or substantially all" antiretrovirals for persons with HIV/AIDS, which means it may not require prior authorization for Fuzeon or “employ any utilization management tools for these drugs.” CMS is also keeping the $600 figure as a threshold for allowing a medication to be placed in a specialty formulary tier but is warning that it will allow such a placement only for formulations that exceed that monthly cost; less expensive doses of the same drug must be covered under the regular tiers.

Tennessee Succeeds in Curbing Rx Drug Use

A concentrated effort by Tennessee officials has succeeded in ending the state's top ranking in per capita prescription drug use. Data for 2006, released in early February, show that per capita prescription drug use in Tennessee dropped 6.6%, from 18.1 prescriptions per person in 2004 to 16.9 prescriptions per person, to garner second place. West Virginia moved into the number one spot with 17.4 prescriptions per capita. (The national average in 2006 was 11.8 prescriptions per capita.)

Terry Shea, director of pharmacy services at BlueCross BlueShield of Tennessee, which commissioned the analysis using data from the most recent Pharmacy Benefit Report compiled by Novartis, notes that older, sicker, and less educated patients tend to be the most frequent users of prescription drugs. The decline in use in Tennessee is directly related to policy changes in the TennCare program, which in 2004 began to limit prescriptions to 5 per month for most adult enrollees (with exceptions for those who receive immunosuppression therapy and chemotherapy) and then, in 2006, began demanding prior authorization before filling prescriptions for some medications.

The rate of prescription use in Tennessee may decline again this year with a new program slated to be piloted in one county in May. Developed by the Tennessee Medical Association, the program will enable physicians and pharmacists in Monroe County to access a patient’s prescription drug history through the use of a swipe card that contains this information. The device, distributed free to patients and compliant with privacy laws, is intended to limit dispensing of Schedule II controlled substances.

In Other Legislative and Regulatory News . . .

Medicare officials are disappointed with the results of a pilot program using care management interventions for enrollees with heart failure or diabetes. The program, mandated by Congress in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, had contracted with 5 support organizations-Green Ribbon Health, serving central Florida; XLHealth Corporation, serving Tennessee; Aetna Health Management, serving Chicago; Health Dialog Services Corporation, serving western Pennsylvania; and Healthways, serving Washington, DC, and Maryland-for a total of 68,000 patients, and was intended to provide a foundation for a broader phase 2 test of the concept. But CMS has told the support organizations to inform the enrollees that the program is ending, and it has suggested that it has serious doubts about expanding the use of care management. A preliminary review of the phase 1 program showed that those enrollees who received the interventions generally fared no better than a control group that did not receive the extra help with adherence. The review also indicated that whatever savings in health care costs might be attributed to the interventions were less than the fees paid to the support organizations.

CMS says that it has a critical need for experts in ophthalmology and orthopedic surgery to join the advisory committee that suggests which treatments should be covered by Medicare. There are currently 38 vacancies on the 100-slot panel, which was established in 1998 and, under the current terms of its charter, is set to disband on November 23.

Allowing independent pharmacies to band together to negotiate contracts with PBMs and health insurers would add $540 million to Medicare's cost over the next 5 years and reduce federal tax revenues by $115 million in the same time frame, according to a study by the nonpartisan Congressional Budget Office. The Association of Community Pharmacists Congressional Network says that the estimate should help pass the Community Pharmacy Fairness Act (HR 971) since the anticipated impact on the federal budget is significantly less than the $29.6 billion figure projected by the Pharmaceutical Care Management Association, representing PBMs, which opposes the legislation.

URAC, a quality certification organization, is planning to begin accreditation programs for mail-delivery and specialty pharmacies, and it is asking PBMs and other drug purchasers and prescribers for their thoughts on the issues involved. The new programs are called for, URAC officials explain, because mail order is “the fastest growing distribution channel for prescription drugs” and specialty pharmacy, while “relatively new,” is "growing rapidly.” The organization expects the new standards to be similar to those required for PBM accreditation, which were first published last July and are expected to be released in a final draft this summer.

Florida pharmacists will be able to substitute generic levothyroxine sodium for branded versions of the hypothyroidism medication, under a ruling from a state administrative law judge. The judge ruled that the state Board of Pharmacy and Board of Medicine were wrong to include the drug on the negative formulary, a list of drugs for which a generic substitution cannot be made by a pharmacist. Abbott, the manufacturer of Synthroid, is appealing the ruling, but the manufacturers of the 3 other versions of levothyroxine-King (Levoxyl), Lloyd (Levothroid), and Jerome Stevens (Unithroid)-did not take part in the case. Mylan, the manufacturer of the only generic version of the drug, filed the petition to have its status changed.

On January 28, the California Senate Health Committee voted down the wide-ranging health reform legislation endorsed by Gov Arnold Schwarzenegger and passed by the legislature's lower house on December 17. The plan would have required most state residents to have health care coverage, and it would have used a combination of subsidies and tax credits to restrict personal outlays of insurance premiums for residents with incomes of up to 400% of the poverty level to no more than 5.5% of their income. But the measure was doomed by projections from the state’s nonpartisan legislative analysts that estimated the cost of the program by 2015 to be between $300 million and $1.5 billion more than the revenues generated by new taxes associated with the proposal.

Indiana residents are applying for a new state program to subsidize their enrollment in a health plan at a much faster rate than expected. On February 6, state officials said that they had received more than 21,000 applications since enrollment began on December 17 and have had to double the size of the staff processing the documents. CMS, which is allowing Indiana to use Medicaid money for the program, is limiting total enrollment to 130,000, with a demand that no more than 26% of enrollees be childless adults. In fact, 70% of the first 1400 applications approved were from childless adults. Enrollees can choose between plans offered by Anthem Blue Cross Blue Shield and MDwise.