Medicare Prescription Drug and Modernization Act of 2003 Fact Sheet

The Biotechnology Industry Organization (BIO) has long been concerned about the access of senior citizens to prescription drug coverage. Biotechnology companies are at the forefront of discovering, developing and bringing to market the next generation of life-saving medicines. Many of the products in biotech company pipelines target diseases that predominantly affect seniors. As an early proponent of adding stop-loss coverage and low-income subsidies to any Medicare drug benefit legislation, BIO developed a set of principles to govern the association's consideration of various drug coverage proposals.

The Medicare conference agreement conforms closely to BIO's principles, and the association urges Congress to act quickly and send the bill to the White House for the president's signature.

BIO's Principles for Medicare Reform

1. Rely on the private marketplace and competition, not price controls that harm innovation.
2. Include stop-loss protection and protection of those most in need first.
3. Expand beneficiary choices among private plans.
4. Improve patient care through innovations in biotechnology.
5. Maintain Medicare solvency.
6. Do no harm to current coverage and reimbursement.

Review of the Medicare Conference Agreement in Light of BIO's Principles

The Medicare conference agreement is a carefully crafted effort to provide drug coverage to all senior citizens while protecting the future of Medicare. Moreover, it is consistent with the incentives needed to develop breakthrough medicines to treat the seniors of tomorrow. BIO is especially pleased that the bill takes steps toward reform of the Medicare program-to ensure that it is available and modernized for future generations of senior citizens.

The bill provides drug coverage through the private marketplace (principle 1), and offers seniors the important option of receiving their drug coverage through more integrated delivery systems (principle 3). It also provides significant low-income subsidies and protection against those with high levels of prescription spending (principle 2).

While the bill provides a significant investment in the drug coverage of senior citizens, it is carefully crafted to ensure that it does not bankrupt the program (principle 5). This framework will also help to prevent undue government involvement that could lead to price controls that could chill innovation (principle 4).

BIO's sixth principle, "Do no harm to current coverage and reimbursement" concerns recent decisions by the Centers for Medicare and Medicaid Services (CMS) that have undermined patient access to critical biotech therapies. BIO's key concerns with current Medicare coverage and reimbursement rules are addressed by the conference agreement. In addition, the agreement is carefully crafted to avoid creating problems for patients attempting to access medicines currently covered by Medicare. Specifically, the bill:

• Addresses problems with CMS's hospital Outpatient Prospective Payment System (OPPS) by establishing payment floors for drugs and biologicals of 88 percent of average wholesale price (AWP) in 2004 and 83 percent of AWP in 2005;
• Requires a new payment method for 2006 that more accurately reflects the costs in acquiring, handling and storing drugs and biologicals;
• Contains a prohibition on future imposition of "functional equivalence" that will preserve beneficiary access to innovative therapies by preventing CMS from declaring that a new product is "functionally equivalent" to an existing one for reimbursement purposes;
• Creates a new market-based reimbursement rate of Average Sales Price (ASP) plus an as yet undetermined percentage for products dispensed in physician offices and reportedly adds over $700 million to the practice expense component for physicians;
• Allows for prescription drug importation from Canada only if the Secretary of Health and Human Services certifies that the products will be safe and that the importation will result in cost savings for consumers and provides for a study on the safety and trade aspects of importation;
• Provides more adequate reimbursement for certain new technologies in the inpatient setting; and
• Provides for more streamlined regulations in the Medicare program.

BIO supports the Medicare conference agreement and appreciates the careful work of members of Congress and their staffs in creating workable prescription drug coverage legislation. We urge Congress to act quickly to get the bill to the president's desk.

Contact Information:

The Biotechnology Industry Organization (BIO) represents more than 1,000 biotechnology companies, academic institutions, state biotechnology centers and related organizations in all 50 U.S. states. BIO members are involved in the research and development of health care, agricultural, industrial and environmental biotechnology products.

For other information and any questions, contact Sharon Cohen at 202-962-9200.