Debt Fight Snares Pharmaceutical Pricing

July 15, 2011
Daniel S. Levine

Pharmaceutical Research and Manufacturers of America says proposals to cut government spending on drugs would threaten jobs.

This article published with permission from The Burrill Report.

The battle in the United States Congress over raising the debt ceiling and finding ways to cut the nation’s deficit has set lawmakers’ eyes on the pharmaceutical industry once again. Renewed efforts to reduce what the government pays for drugs has set the industry off on a campaign that argues such measures would kill jobs at a time when the nation needs to be fueling new job creation.

The Pharmaceutical Research and Manufacturers of America, armed with a new study it paid Battelle Technology Partnership Practice to conduct, is firing back at proposals to include government-mandated rebates in Medicare Part D as part of a debt ceiling agreement. The group says it is critical that the jobs crisis is not exacerbated as the president and Congressional leaders negotiate an important agreement on the debt ceiling and the future of the nation’s economy.

The study found that a $20 billion per year reduction in biopharmaceutical sector revenue would result in 260,000 job losses across the U.S. economy. It also finds the biopharmaceutical sector supported a total of 4 million jobs in 2009, including nearly 675,000 direct jobs. Each job in a biopharmaceutical research company supported almost 6 additional jobs in other sectors, ranging from manufacturing jobs to construction and other building service jobs to contract researchers and child care providers, the report says.

“We have to create jobs, not lose more,” says John Castellani, CEO of PhRMA. “We have to support innovation, not interfere with the most innovative sectors of our economy. We must continue to improve the health of America’s seniors, not increase costs and erect barriers to promising scientific breakthroughs.”

In June, Democratic Congressmen Henry Waxman, John Dingell, Sander Levin, George Miller, Pete Stark and Rob Andrews introduced legislation that they say would save the government $112 billion over 10 years by reducing Medicare Part D drug costs to the government. It would do so by reinstating rebates that were eliminated by the Medicare Part D legislation in 2006. They say the elimination of those rebates created a windfall for pharmaceutical companies. Prior to the legislation the government received rebates on drugs used by enrollees who were eligible under both Medicare and Medicaid.

“The federal government is the largest payor for seniors’ drugs and it is absurd we do not use our bargaining power to negotiate drug discounts with the high profit pharmaceutical industry,” said Rep. Miller, Ranking Member of the Committee on Education and the Workforce. “Unlike the Republican plan, Democrats recognize that you don’t reform Medicare by ending the program nor do you make Medicaid sustainable by simply shifting the costs onto states.”

The Battelle study can be found here.

Copyright 2011 Burrill & Company. For more life sciences news and information, visit www.burrillreport.com.