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Senate Health Care Bill Shows Sky Is Not Falling On Drug Makers

The Senate passed their version of the health care legislation on December 24 by a party-line vote of 60-39. A look at both the House and Senate drafts suggests that the final bill likely to reach President Barack Obama for his signature in January will not be as unkind to drug makers as originally feared.

The compromise bill likely to emerge from a House-Senate conference will extend health insurance coverage to an estimated 30 million Americans who don't have it or who can't afford it. The nonpartisan Congressional Budget Office pegs the cost at $871 billion over the next ten years -- to be financed through new taxes and combined Medicare/Medicaid savings of $438 billion (spending cuts (ha!) and cost controls, such as targeted reductions in waste, fraud, and other abuses in public programs).

Drug makers are being profiled for a $2.3 billion annual industry tax for the next decade under the Senate bill (effective for sales beginning January 1, 2009), but would escape such a provision under the House version. Company profits are unlikely to be hurt, however, as the Senate version contains an amendment that would grant 12 years of market exclusivity from generic intrusions for branded biologics.

Looking to supposedly lower the aggregate cost of prescription drugs, the Democratic House leadership successfully pushed through in their bill a provision that prohibits payments from brand name makers to generic manufacturers to delay introduction of cheaper copycat drugs. However, as drug makers have already pledged $80 billion in price reductions to the Obama administration (through negotiated contracts, such as rebates) of branded pills, this amendment is unlikely to garner enough support to make it to the House floor when the vote is taken on the compromise bill that emerges from joint committee.

Branded drug sales could also receive a boost through legislated increases in prescription drug coverage for Medicare recipients. Also helping, financial incentives awarded to providers if Medicare and Medicaid patients seek out primary preventive care services, such as treatments for diabetes and high blood pressure - resultant in improved health outcomes and fewer hospitalizations.

Drug makers have scored an initial victory, too, in the battle to increase regulatory control over sales and marketing practices. Legislation is likely to result in more transparency in the financial relationships between manufacturers and health care providers (including hospitals, pharmacists, and physicians). However, efforts by Senator Mark Begich (D-AK)and Senator Al Franken(D-MN) to introduce legislation that would eliminate the tax deductibility of advertising, such as direct-to-consumer advertising expenses and free product samples, does not appear to have widespread support among congressmen. E-mails to the offices of both senators seeking additional comment went unanswered.

"I saw it with my eyes, I heard it with my ears," cried Chicken Little, "the sky is falling." The sky is indeed falling for many in the drug industry -- especially sales representatives -- but at least not for today.

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