Biotech dodges a bullet

There's a lot in the new House reform bill the biopharma industry will fight. A mandated rebate on drugs for dual-eligibles--seniors who qualify for both Medicare and Medicaid--would cost manufacturers around $60 billion. And the House bill gives Medicare the power to negotiate prices, a feature notably absent from what the Senate has to offer.

That $80 billion in drug industry concessions for Medicare? Not enough, says the House, which wants $140 billion to make the numbers work.

The average biotech exec, though, is likely to be pleased to see that while the House version includes a pathway for approvals on biosimilars, there's also a provision granting 12 years of sales exclusivity on therapeutics derived from proteins. While the House has included some of the boldest attempts to limit market exclusivity to only five years, there's been a profound reluctance on the part of most House members to pick up that flag and run with it. Henry Waxman's effort to do that was trampled by members of his own party in his own committee.

PhRMA will continue to pull its hair and shred its clothes over any bill that goes beyond the concessions already on the table. The fact is, though, that even these higher costs leave the industry in decent shape. The U.S. market has long been viewed as an oasis of profit-making in a parched global desert of government restrictions and forced price concessions. The U.S. hasn't come close to the UK's tough evaluation of a new drug's actual value. Japan's drug purchasing system mandates an annual reduction in price. Industrialized nations long ago recognized that when societies accept responsibility for universal care, they had to control costs. And they did.

At some point, rising costs may force lawmakers to actually get tough with drugmakers, and that would have an effect on biotech--the de facto R&D arm of the global drug industry. So far along, the industry has managed to dodge a bullet. But something tells me that the war over drug prices won't be ended by this reform bill. - John Carroll