- The Washington Times - Tuesday, September 27, 2011

The chief spokesman for pharmaceutical manufacturers says President Obama has stuck two thorns in the industry’s side at a time marked by uncertainty as lawmakers contemplate cutting health care programs and battles over the new health care law wind their way through the courts.

When the president presented his deficit-cutting plan last week, he included measures that will drive up drug prices and squash investment in companies that develop drugs and medical devices, said John Castellani, president of the Pharmaceutical Research and Manufacturers of America (PhRMA).

The industry is especially fuming over Mr. Obama’s push to reduce the length of time a company can produce biologic drugs exclusively by paring the patent protection time frame from 12 years down to seven.

“It’s absolutely wrongheaded,” Mr. Castellani said. “It drives the opposite effect that the president stated he wants to reach.”

In an interview with editors and reporters of The Washington Times, Mr. Castellani criticized the administration for policies he thinks will hinder medical advancement, outlined recent negotiations with the Food and Drug Administration and touched on his hopes for the congressional supercommittee charged with reaching a deficit-reduction agreement this fall.

The next few years will be pivotal ones for the industry, as lawmakers seek to stabilize the chronically underfunded Medicare and Medicaid programs and more elements of the Affordable Care Act go into effect, he said.

“The decisions that are going to be made over the next 12 to 24 months are really going to drive the future of our industry,” he said. “We just don’t know what the future is.”

A sector with powerful lobbying muscle, the pharmaceutical industry interacts with the federal government at nearly every turn, relying on the FDA to approve its products and in turn selling them to the one-third of Americans insured by Medicare and Medicaid.

That relationship is fraught with tension, as companies try to attract investors to develop and get new medicines approved and lawmakers attempt to keep health care costs down.

By opening the market to generic versions of drugs within seven years, instead of 12, the federal government could save an estimated $3.5 billion in federal health spending over 10 years.

But the pharmaceutical industry argues that companies need 12 years to recoup the costs of researching, developing and getting medicines approved by the FDA. Getting one new drug from the lab to patients costs between $1 billion and $1.3 billion and takes an average of 10 to 12 years, Mr. Castellani said.

“You can’t go and say to a small, innovative biopharmaceutical company that is depending on venture-capital funding, ‘Go out there and do everything you can to develop this next generation of medicines, and by the way, you won’t have nearly the amount of time you’ll get to recover the incredible cost,’” he said. “That’s partly why you see the venture capital drying up.”

The industry is also indignant that Mr. Obama looked its way to find the largest bundle of savings for his deficit-reduction plan. He wants to require drug companies to charge the government less for drugs supplied to low-income Medicare patients, as they currently must do for Medicaid patients.

Extending the drug rebate would save the federal government $135 billion over 10 years, according to the president. But Mr. Castellani said companies would just pass along the cost to private purchasers and have less money to spend in medical advances.

He did hand some credit to the president for pushing the FDA to modernize and expedite drug approvals. But when it comes to policy, he said, Mr. Obama doesn’t understand the industry’s “core” needs.

“I think this administration has a very difficult time understanding the horizontal fabric that’s necessary to stay in our business,” he said. “It is not just one thing that drives a business decision; there are whole sets of decisions that need to be made.”

Mr. Castellani hopes the supercommittee will ignore Mr. Obama’s rebate proposal as it searches for at least $1.5 trillion in cuts, tax increases or some combination in a deficit-reduction plan that is likely to include entitlement programs.

The industry is fresh off of negotiating a revamp of the Prescription Drug User Fee Act, which governs how much companies must pay to get new medicines approved. Under a deal reached last month, more of the fees will fund improving the FDA’s ability to evaluate and approve drugs.

Industry leaders also are looking ahead to next year, when the Supreme Court is likely to hear challenges to the mandate in the health care law that requires individuals to purchase health insurance or pay a penalty.

If the mandate was overturned, and fewer Americans bought health care coverage than originally thought, pharmaceutical companies would encounter less demand on the insurance exchanges — the new marketplaces where many are expected to purchase insurance. The uncertainty is weighing on the industry, Mr. Castellani said.

“If the individual mandate is held to be unconstitutional, the exchanges don’t work,” he said. “If the exchanges don’t work, the predicates for the economic models and the contributions we made, the changes in the insurance system don’t, and the whole thing falls down.”