A new Outreach/Alliance Development Committee is hosting regular briefings, tours and recognition events for health advocacy groups. Twenty-four member companies participate in the outreach committee.

Patient groups also are becoming a bigger part of BIO meetings. More than a dozen patient advocates moderated panels at the 2004 CEO & Investor Conference. Another three dozen participated in BIO 2004 convention activities, including panels, a patient and health advocacy exhibition, and BIO TV programming. Several keynote speakers at the event were tapped from the patient advocate community: Brooke Shields, an actress who benefited from a biotech fertility drug; Janet Hubert, an actress and supporter of African American health initiatives; and singer Patti Labelle, an advocate for cardiovascular and diabetes research.

Special events are important, but BIO stays in touch with patient allies on a day-to-day basis as well, providing information about the latest biotech research to nearly 300 groups. BIO also organizes patient advocate briefings on topics like drug importation, plant- and animal-made pharmaceuticals, and Medicare regulations.

New projects in 2005 seek to reach more medical specialty groups, address health disparities in minority communities and focus on patient safety and drug development.

FDA AND DRUG SAFETY
Critical Path
In an effort to reverse a decline in approvals of new drugs, the FDA has launched the Critical Path initiative, an effort to work with academia and industry to create a new suite of tools that bring cutting-edge science and technology to drug development. In a white paper describing the project, the agency expressed interest in, among other things, computer-based predictive models, wider use of biomarkers and imaging technologies, and improved clinical trial design.

The initiative will encompass both tool development and regulations to guide drug developers in the use of those tools. Both are critical if the agency is to make a difference in bringing more breakthrough drugs to patients. According to Janet Woodcock, the agency’s acting director of operations, the Critical Path involves nothing less than changing the perception and role of the FDA from “rule-based regulators to science- based standard setters.”

In the summer of 2004, BIO and several member companies responded to the agency’s request for comments with a slew of suggestions, including cautioning the agency to stay focused on efficient and timely review of approval applications and other obligations under the Prescription Drug User Fee Act.

Drug Safety
In the wake of new data about the risks of certain pain killers and antidepressants, the FDA is under pressure in 2005 to improve drug safety. Some in Congress have proposed establishing an independent office of drug safety, and the National Academies’ Institute of Medicine has initiated a study on drug safety at the request of the FDA.

In February 2005, the FDA created the Drug Safety Oversight Board to oversee management of drug safety issues and provide risk-benefit information to patients and health providers as it emerges.

Other ideas in circulation for improving safety include:

• strengthening post-marketing surveillance;
• better use of information technology to detect signals of adverse events earlier;
• greater use of the FDA’s advisory boards;
• new incentives to encourage additional safety studies; and
• developing new technologies to assess safety more effectively and earlier in the development process.

The list is long, and BIO is studying every proposal with an eye toward developing a comprehensive response. As a general principle, BIO supports giving doctors and patients the best possible information on medication risks. However, it is important that the risk-benefit assessment of new drugs not become too conservative—an issue critical to patients with unmet needs.

An urgent task is to educate Congress and other policymakers about existing drug safety mechanisms and the fact that no drug is without risk. BIO will continue to work with other stakeholders to improve the processes of drug safety evaluation, review and post-market surveillance. BIO’s number one message is that the FDA and drug developers can protect patients without sacrificing innovation.

Clinical Trial Disclosures
BIO has created a task force to address concerns that doctors and patients are not getting all the information they need about clinical trials. The group is charged with developing a policy on expanding the National Institutes of Health’s clinicaltrials.gov Web site and on publishing study results. The results publishing policy will address such issues as the types of results to be published, how a registry should be operated, the timing of disclosures, the format of disclosures, exemptions from disclosures, and compliance enforcement mechanisms.

The 1997 Food and Drug Modernization Act calls for registration of all clinical trials for serious and life-threatening diseases in the clinicaltrials.gov database. Listing of other trials is not required, though many sponsors do post studies in order to attract patients. As of mid-2004, the site listed 10,906 studies, including 2,230 industry-sponsored trials representing 425 companies.

Already, a number of companies have committed to expanded disclosure of clinical trial results.

An added incentive is the decision of the International Committee of Medical Journal Editors to publish results only of studies that have been previously disclosed.

Importation
Efforts to loosen legal restrictions on drug imports, particularly from Canada, were dealt a blow when a Health and Human Services task force in December released findings that the practice could compromise the safety of American patients, would do little to save them money, and would result in the loss of between four and 18 new drugs per decade. The task force was created by the 2003 Medicare Modernization Act.

Selected Biotechnology and Biotech-Related FDA Approvals, 2004*

New Products

New Indications

OTHER FDA APPROVALS OF INTEREST

In previous legislation, Congress gave the go-ahead on importation, but only if the HHS secretary could certify safety—something HHS leaders in both Democratic and Republican administrations have declined to do.

Although importation proposals have excluded biologics, BIO has expressed serious concerns about all such measures because they threaten patient safety in general, and because a biologics-only prohibition would be difficult, if not impossible, to enforce.

Follow-on Biologics
With a few companies already expressing interest in marketing follow-on versions of recombinant protein therapies, momentum is gathering to resolve issues surrounding approval of such products. BIO initiated discussions on the matter in the spring of 2003 with a citizen petition urging the FDA to adopt a transparent process and seek public input regarding whether and when to develop regulations for follow-on biologics. 2004 brought an FDA public workshop on scientific issues, at which BIO outlined its position and several member companies presented data illustrating the scientific challenges of follow-ons.

At that meeting and in subsequent comments to the FDA and the European Medicines Evaluation Agency, BIO described the complexity of biologics, as well as their inherent heterogeneity and dependence on specific manufacturer processes that cannot be duplicated exactly by other manufacturers. Such products are made in living systems, unlike conventional small-molecule therapies, and require a full complement of data, including clinical trials, to demonstrate safety and efficacy. Anything less puts patients at risk.

BIO also has filed comments with the FDA regarding the legal and intellectual property issues that would be raised by a policy to approve followon biologics.

BIODEFENSE

BIO supported passage of The Project BioShield Act of 2004, which provides $5.6 billion over 10 years for the federal government to procure diagnostics, therapies and vaccines to protect Americans from chemical, nuclear and biological warfare agents. BioShield is a critical first step for developing a viable biodefense industry in the United States, but additional measures—including enhanced liability protection—are needed to attract robust private-sector participation.

Companies face extraordinary liability risks when developing products for biodefense because such products cannot be tested ethically for efficacy in humans (to do so would require exposing human subjects to agents such as anthrax and smallpox, or to radiation or toxic chemicals). Moreover, for some potentially important countermeasures, it may be difficult to distinguish the drug side-effect profile from the biothreat pathology.

BIO supports a BioShield II bill to strengthen liability protection and address other shortcomings of the program. BIO participated in a late 2004 congressional hearing on a new bill and expects legislation in the current Congress.

COVERING THE UNINSURED

Now that Medicare has been expanded to cover outpatient medicines, expanding coverage to America’s 45 million uninsured is becoming a priority in Washington. BIO stands ready to explore workable approaches to provide more individuals with health insurance and greater access to the latest innovations in medical treatment. In June 2004, BIO adopted the following principles to govern consideration of any policy aimed at reducing the number of uninsured:

• Strengthen our public health system. Our public health system should be upgraded to provide more extensive preventive health services to the community.Without health insurance, individuals delay seeking care and can become a public health risk.
• Support market-based solutions to expanding health coverage, including Medical Savings Accounts (MSAs) and tax credits. Additional tax credits, delivered through the income tax system, could help individuals purchase insurance. Also, by eliminating the current limitations on MSAs, more individuals will have incentives to save money to invest in their own health care—including individuals who are healthy and without access to employer-based health insurance.
• Support maximizing participation in valuable public programs, especially the State Children’s Health Insurance Program. Providing education regarding programs for which the uninsured may be eligible but not enrolled is a potentially important solution. Dollars for these programs have gone unused because many individuals do not realize they are currently eligible for health insurance. Before investing in new solutions, policymakers should ensure that existing solutions are fully utilized.
• Enhance individual and employer responsibility. In some instances, eligible individuals do not participate in employer-sponsored health insurance. Incentives should be provided to ensure all eligible individuals participate in employer-sponsored health plans. At the same time, employers, particularly small businesses, should have incentives to be able to provide health insurance to their employees that is affordable and comprehensive.
• Assure patient access to innovative therapies. BIO believes that all proposals to help the uninsured should maintain access to innovative therapies. Proposals that limit access to innovative medical technology can lead to potential delays in obtaining medical care, resulting in higher health care costs. All patients deserve access to these therapies, regardless of their insurance status.

MEDICARE

At the Centers for Medicare and Medicaid Services (CMS), 2005 will be dominated by preparations to implement a new Medicare prescription drug benefit by Jan. 1, 2006. The voluntary benefit, covering up to 42 million Medicare-eligible senior citizens and disabled Americans, was the centerpiece of the 2003 Medicare Modernization Act (MMA).

Consumers have seen some benefits already. In 2004, CMS launched drug discount cards as an interim measure, created a Web site publishing drug prices, and launched a $500 million demonstration program covering some oral anticancer drugs and self-injected biologics.

Meanwhile, the agency has issued a multitude of proposed and final regulations for implementing the core outpatient drug benefit, which will become Part D coverage under Medicare.

Of keen interest to BIO in 2004 was the development of formulary guidelines. BIO supports Medicare’s use of private-sector plans that employ formularies to control prescription-drug costs. Under a typical formulary system, consumers pay a low co-payment for generic drugs, a slightly higher co-payment for branded drugs that are listed in the formulary and a top co-payment for branded drugs not in the formulary.

As a requirement of the MMA, CMS contracted with the U.S. Pharmacopeia (USP), a private, nonprofit agency, to develop formulary guidelines, which would be nonbinding on plans but would serve as a favored model. BIO urged USP to carefully consider orphan disease, end-stage renal disease and cancer populations when developing its guidelines. The final guidelines call for 146 therapeutic categories and classes, each of which must include at least two drugs.

Physician’s Office and Hospital Drug Payments Under Medicare
The Medicare Modernization Act also made sweeping changes to reimbursement for drugs used in doctors’ offices and hospital outpatient centers. CMS implemented a methodology based on average sales price (ASP; calculated using actual reported prices) instead of one based on average wholesale price (AWP; a manufacturer-reported price often higher than actual sales prices). BIO supported the move.

In crafting the final rule on hospital outpatient prospective payments, the agency incorporated a number of BIO’s suggestions including:

• maintaining the $50 packaging threshold for drugs rather than packaging them into Ambulatory Payment Classifications;
• reimbursing orphan drugs at the higher rate of 88 percent of AWP or 106 percent of ASP, without an AWP cap;
• recognizing that radiopharmaceuticals are drugs or biologics and treating them as such (and not as devices);
• automatically treating new drugs and biologics as “pass through” products eligible for extra payments; and
• acknowledging that all biologics are sole-source products.

Unfortunately, CMS has yet to change its policy on “equitable adjustment,” formerly called “functional equivalence.”Under the policy, two very different drugs may be reimbursed at the same rate if they are determined to work through the same mechanism—even if their administration or outcomes are different. BIO argued against this policy, submitting written comments that said the government should “never apply functional equivalence or a similar standard again.”

New Methodology Coming
BIO’s attention now turns to the 2006 methodology CMS will be developing under the Medicare Modernization Act for drugs used in hospital outpatient centers. The law calls for CMS to consider a Government Accountability Office study of hospital acquisition costs for the drugs and a Medicare Payment Advisory Commission study of pharmacy service and overhead costs. BIO is closely monitoring these studies.

STATE-LEVEL REIMBURSEMENT ISSUES

The states continue to be laboratories of health-care policy, particularly when it comes to prescription drug issues. Among pricing mechanisms considered during the 2004 session were:

• plans to expand the federal 340B discount pricing program, which mandates drug discounts for public health providers;
• adoption of federal supply schedule pricing for Medicaid and other state health programs; and
• implementation of foreign nations’ pricing schedules.

Altogether, legislation related to discount programs was introduced in 28 states and enacted in seven. Importation was widely considered as an option for dealing with rising health costs (see discussion on pages 6 and 10). In California, Gov. Arnold Schwarzenegger vetoed importation bills, but on the condition that drug makers provide discounts to residents earning incomes up to 300 percent of the federal poverty level.

So far, BIO and state affiliates have succeeded in holding off the worst prescription drug measures by educating government leaders on the impact on biotechnology innovation and economic development.

Even so, BIO expects cost and reimbursement issues, particularly concerning Medicaid, to be at the forefront of state legislative agendas again during 2005.