Biotech Executives to Tell Congress: Fix OPPS With Proposed Legislative Remedies

WASHINGTON, D.C. (April 7, 2003) – As Congress holds three hearings this week on expanding Medicare drug coverage to include the full range of outpatient prescription drugs, biotechnology executives will converge on Capitol Hill to urge that legislators remedy the flawed methodology for determining reimbursement for drugs currently covered under the program. Approximately 200 industry leaders are expected to share proposed legislative remedies during the Biotechnology Industry Organization’s Legislative Day event Tuesday and Wednesday, April 8-9.

“It’s ironic that as Congress seeks to improve Medicare by adding new outpatient coverage, those drugs and biologics that are already covered – including most biotechnology medicines – are under dire threat,” said Sharon Cohen, BIO’s vice president for federal government relations. “Although such coverage has been mandated by Congress, an administrative rule that went into effect January 1 is endangering patient access to some of the most innovative therapies available. In many cases, reimbursement to hospitals for use of these drugs and biologics under Medicare’s Outpatient Prospective Payment System, or OPPS, has been slashed well below the hospitals’ cost.

“When use of these medicines becomes a money-losing proposition for hospitals, patients may in turn lose access to them, or their care may be shifted to other settings where reimbursement is better, such as doctor’s offices,” said Cohen. “For patients already suffering from disabling or life-threatening illnesses, shifting care can be traumatic, and in some cases simply may not be an option.

“Congress needs to act now to assure that what little drug coverage currently exists is protected as they work toward the goal of passing expanded coverage,” she said.

BIO’s proposed legislative remedies for Medicare’s OPPS program include the following:

· Permanent separate reimbursement for all innovative drugs and biologics. Currently, these products are reimbursed separately only during their first two years on the market.

· Reimbursement rates based on the average hospital price (AHP) for these products, taking into account discounts, rebates, and other measures that reduce the effective price. Reimbursement rates should also account for hospital pharmacy and overhead costs.

· Exclusion of orphan drugs from OPPS. Because orphan drugs are intended for very small patient populations, they do not fit well into a system based on averages. BIO proposes that orphan products with fewer than 30,000 OPPS claims be reimbursed at hospital invoice cost. For an orphan product with more than 30,000 claims, prescriptions made to treat the orphan indication should also be reimbursed at invoice.

· Reimbursement beginning at day one. Hospitals should be able to submit payment claims for a new drug or biologics from the FDA approval date. During a drug’s first year on the market, reimbursement would be at the rate of wholesale acquisition cost. Thereafter, the AHP-based rate would take effect.

· Adherence to FDA and statutory definitions of drugs, biologics, orphan drugs and medical devices, along with prohibition against the use of the “functionally equivalent” standard or any similar standard for setting payment rates. BIO is urging Congress to strike provisions in the OPPS rule that created the concept of functional equivalence and defined radiopharmaceuticals as non-drugs. These two measures were implemented without an opportunity for public comment, in violation of due process.

“The current OPPS rules not only threaten patient access to existing medicines, they can have a stifling effect on innovation,” added Cohen. “Without adequate, predictable reimbursement that rewards the development of products that save lives or improve quality of life, biotechnology companies cannot afford to invest the 10-plus years and hundreds of millions of dollars it takes to develop a new drug or biologic. As Congress takes up the Medicare drug coverage debate once again, we urge them to fix the system that currently covers products desperately needed by our nation’s seniors and disabled population.”

For more information, including BIO testimony, letters and Medicare principles, visit BIO has also posted video highlights from a recent OPPS Hill briefing at

BIO represents more than 1,000 biotechnology companies, academic institutions, state biotechnology centers and related organizations in all 50 U.S. states and 33 other nations. BIO members are involved in the research and development of health-care, agricultural, industrial and environmental biotechnology products.