[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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