SFC Chairman’s Mark of Health Care Reform Bill Rivals House Counterpart in Discounts and Fees Imposed on Drug and Device Companies

September 16, 2009

By Alan M. Kirschenbaum

Today the Senate Finance Committee (“SFC”) released the Chairman’s Mark of the “America’s Healthy Future Act of 2009,” which currently is scheduled for Committee mark up next Tuesday, September 22.  Among the various health reform proposals in the House and Senate, the Senate Finance Committee bill is viewed as the approach most likely to succeed.  Although health care reform will substantially benefit drug and device manufacturers by increasing the insured population, the bills also seek to extract discounts from manufacturers to help pay for reform.  The SFC Chairman’s Mark is no kinder to manufacturers in this regard than the health care reform bill reported out of the House Energy and Commerce Committee on July 31, which was the subject of an earlier post

Both the SFC Chairman’s Mark and the House bill would increase the minimum Medicaid rebate, though the Mark would increase it more than the House bill, and, unlike the House bill, would impose increases on non-innovator as well as innovator drugs.  Other, more minor tweaks to the Medicaid Rebate Program are similar.  Both would change the Federal Upper Limit methodology, though the FULs in the Senate version would be higher.  Both bills would also require drug manufacturers to fund a 50 percent discount on drugs purchased by Medicare Part D beneficiaries in the coverage gap.  Both bills contain physician payment “sunshine” provisions, though the reporting requirements under the House bill are more extensive.  The major differences in regard to payments extracted from manufacturers are that the House bill would require drug manufacturer rebates for dual eligibles, while the SFC Chairman’s Mark would not.  On the other hand, the Mark would impose aggregate annual “sector” fees of $2.3 billion and $4 billion on the drug and device industries, respectively, to fund Medicare, while the House bill does not contain such fees.

You will find a summary of the drug- and device-related provisions of the SFC Chairman’s Mark here.  Please note that this summary only addresses provisions of the Mark that would most directly affect drug and device manufacturers.  There are many other aspects of this bill that would have an indirect but considerable impact on drug and device manufacturers.

The health care reform debate in Congress is fluid.  The Senate Finance Committee bill could change substantially in mark-up, or it might not be reported out of Committee at all.  The House Energy and Commerce Committee bill faces similar uncertainty as it goes to a potential second mark-up and to the House floor.  We will be following these developments closely and reporting on the aspects that most directly affect drug and device manufacturers.