[Congressional Record Volume 140, Number 57 (Wednesday, May 11, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: May 11, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
           PRESCRIPTION FOR HEALTH CARE: LET THE MARKET WORK

  (Mr. FIELDS of Texas asked and was given permission to address the 
House for 1 minute and to revise and extend his remarks.)
  Mr. FIELDS of Texas. Madam Speaker, the White House believes that the 
Government, rather than the private sector, should run every health 
care program. And this is certainly the case with the Medicare 
prescription drug benefit. The President proposes taking private sector 
managed drug plans that works well now for retirees, dismantling them, 
replacing them with a few thousand bureaucrats, a few hundred pages of 
Federal regulation, and hundreds of complicated forms, and seeing if 
they can get it to work as well as the private sector plans now do.
  Not only is this a terrible waste of the taxpayer's money and a 
threat to a thriving drug industry, it is also disruptive for the 
retiree who now has drug benefits through the retiree health or Medigap 
plan.
  The most outrageous part of this proposal is that although it is 
being advanced as a way to control drug costs, it will create havoc 
with the very activities now successfully controlling drug costs in the 
private market.
  To begin with, pharmaceuticals are one of the greatest industrial 
success stories in this country. They have grown as a major export 
product for the United States--worldwide sales reached nearly $85 
billion in 1993, nearly four times what they were in 1980--and as a 
major source of R&D, spending over $10 billion on R&D last year alone. 
Competition in this country is intense, and that competition has 
brought remarkable medical advances in the last decade alone.

  The race to bring new drugs to market has not only contributed to 
significant advances in patient care but has also helped to slow the 
overall growth in health care costs. New drugs are making it possible 
to replace expensive surgeries with much less costly drug treatment. 
Ulcer drugs, for example, have reduced the number of surgical 
procedures from 155,000 to 16,000 a year, saving $24,000 on each case. 
New drugs for chronic heart failure have lowered the need for 
hospitalization by 30 percent. Medications for the treatment of 
depression are significantly reducing both physician and hospital 
costs.
  Sometimes this race for new drugs leads to a whole new treatment--a 
breakthrough. Often it produces several drugs that compete in the same 
therapeutic category, giving physicians and managed care plans a choice 
of medications, and creating competition that forces down prices both 
for new introductions and for drugs that have been on the market.
  I have attached a story from the Washington Post that makes it pretty 
clear how competition in this new marketplace where most of the sales 
are to managed care plans is influencing drug prices and changing the 
way manufacturers approach decisions on research. The power of managed 
care plans to force major price concessions for newly introduced drugs 
is reducing the return on these drugs and forcing companies to only 
bring the most cost-effective drugs to market.
  This article makes the point that the market for drugs is doing 
exactly what we want--making sure the new drugs brought to market are 
noticeably better and less costly than the existing therapies.
  What is it the administration wants to do? They want Medicare to buy 
all the prescription drugs for the elderly. Combined with Medicaid, 
that would have the Government buying about 40 percent of all the drugs 
sold in the United States. Then, because the Government can never 
figure out the right price, they want to force drug manufacturers to 
give the Government at least a 17-percent rebate. The rebate is 
supposed to approximate the discounts managed care plans would have 
been able to get had the Government not stepped in and pushed them 
aside. In addition, the administration wants to review prices for new 
drugs and refuse to cover the drug if they think the price is too high. 
Finally, they want to force the manufacturer to offer the drug to every 
purchaser, if they want, at the lowest negotiated price.
  The last thing we want to do is turn this marketplace upside down 
with a Medicare benefit and then try to create a whole new Government 
apparatus for controlling costs. Not only would that be a complex and 
costly bureaucratic undertaking, it would also probably not result in 
the kinds of cost-effective decision making that is already going on in 
the industry.
  I would urge my colleagues to oppose the administrations pathetic 
efforts to create a new Government program. The marketplace already 
exists without having to destroy the marketplace and the viability of 
the pharmaceutical industry and drug research in the process.

               [From the Washington Post, Apr. 26, 1994]

                    Cutting Back on ``Me Too'' Drugs


           Pharmaceutical Firms React to Health Care changes

                        (By David S. Hilzenrath)

       Changes in the health care business are driving many drug 
     companies to do something that their critics have long been 
     urging--cultural development of so-called me-too drugs, which 
     serve essentially the same purpose as products already on the 
     market.
       Those pharmaceutical makers are increasing their emphasis 
     on potential ``breakthrough'' drugs--major medical advances--
     because health insurers' efforts to reduce costs are making 
     me-too drugs harder to market profitably, industry executives 
     said.
       ``We're very ruthlessly stopping projects when we think 
     that we will be second or third in the marketplace or if the 
     advantage afforded by a new molecule is not a really 
     substantial innovative leap forward,'' said Leigh Thompson, 
     chief scientific officer of Eli Lilly & Co.
       The pressure on me-toos is coming from managed-care health 
     plans, which are using their growing influence to squeeze 
     pharmaceutical prices. Managed-care plans often develop lists 
     of drugs approved for coverage under their prescription drug 
     benefits, and they frequently negotiate discounts with 
     suppliers for products on the lists.
       Drugmakers said it can be difficult to get me-too drugs 
     added to the lists, and they said they expect it to become 
     even harder to command high enough prices to recoup their 
     investment in me-toos. ``The payers simply are not going to 
     pay premium prices for me-too drugs,'' added an executive at 
     one company that manages drug purchases for health insurers. 
     ``The bucks aren't going to be there.''
       But by producing fewer me-toos, drugmakers could make it 
     more difficult for insurers and other large buyers to bargain 
     down prices. Although they are ``often derided as not 
     contributing to health care,'' me-too drugs are needed if 
     price competition is to occur, the government's Office of 
     Technology Assessment said in a report last year.
       Critics of the drug industry have faulted manufacturers in 
     the past for lavishing time and money on me-too drugs when 
     they could be developing cures and treatments for unsolved 
     medical problems.
       But drugmakers say one risk of a ``no me-too policy'' is 
     that research will be aborted before they know whether the 
     chemicals they are studying will lead to incremental or major 
     advances. Another is that companies will stay out of races to 
     develop specific products if they perceive themselves as 
     trailing another company, only to see the frontrunner falter 
     somewhere down the road.
       Me-too drugs often offer measurable, if modest, advantages 
     in safety or effectiveness over the products that precede 
     them, industry officials say. Medicines do not affect 
     everyone the same way, and the benefits of the me-too product 
     can be profound for some patients, they say.
       ``I'm worried that we are going to find ourselves 
     developing too few drugs because we are setting our standards 
     too high,'' said Leon Rosenberg, president of the research 
     arm of Bristol-Myers Squibb Co. and a former dean of Yale 
     Medical School. ``We may very well end up turning away from 
     developing drugs that a segment of the population really 
     needs.''
       Me-too drugs have historically absorbed a large share of 
     pharmaceutical industry research and development budgets. 
     From 1978 to 1991, 135 new pharmaceutical molecules approved 
     by the Food and Drug Administration were classified by the 
     FDA as having ``little or no therapeutic gain,'' while only 
     42 were classified as representing an ``important therapeutic 
     gain.''
       The me-toos compete directly with other brand-name products 
     that are still protected by patents. The competition gets 
     even tougher when the patents expire and rival companies can 
     introduce generics, chemically identical copies that 
     typically carry lower prices than the originals.
       The pressure from managed-care companies is affecting the 
     way drug companies allocate their research and development 
     budgets, which the Pharmaceutical Manufacturers Association 
     said would total $13.8 billion this year for its more than 
     100 member companies, up from $12.6 billion last year.
       Some drugmakers have tried to market me-too drugs by 
     sharply undercutting their competitors' prices, as in the 
     case of Lescol, cholesterol-reducing drug recently introduced 
     by Sandoz Pharmaceuticals Corp. But development of Lescol 
     began in 1982, and Sandoz submitted it for FDA approval two 
     year ago.
       A more recent--and perhaps more typical--example was G.D. 
     Searle and Co.'s decision late last year to stop development 
     of a drug to lower blood pressure. The Drug offered some 
     potential advantages, including fewer or milder side effects, 
     but the company decided they were not sufficient to set the 
     substance apart from the competition, said John Alexander, 
     executive vice president of medical research at Searle. ``I 
     would say two to three years ago we would have developed that 
     drug,'' he added.
       Some drug executives advance an opposing theory--that 
     managed care's emphasis on low prices will reward companies 
     that develop me-too drugs. By spending less money than 
     pioneering manufacturers do on original research, imitators 
     should be able to charge lower prices, some executives argue.
       ``The me-too drug will eventually take over the market from 
     the innovator or drive down the price of the innovator,'' 
     said James Niedel, senior vice president for research and 
     development at Glaxo Inc.
       But other industry observers said it would be difficult of 
     imitators to by-pass much of the original research needed to 
     bring a drug to market, including the huge investment in the 
     clinical trials required for FDA approval.

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