Obama healthcare budget cuts

Home/Policies & Legislation | Posted 24/02/2012 post-comment0 Post your comment

US President Barack Obama has announced proposals for fiscal year 2013 which aim to cut the US deficit by US$4 trillion over the next decade. However, drugmakers have reacted with disappointment to proposed cuts to health care.

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The budget for 2013 proposes that US$364 billion be cut from spending on Medicaid, Medicare and other healthcare insurance programmes over the next ten years.

Savings will be made by cutting Medicare drug rebates, reducing payments to physicians and hospitals and increasing costs for some retired patients. States will also have to pay more towards Medicaid costs and measures to reduce waste and fraud will be increased.

Mr John Castellani, President and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA), said that ‘despite President Obama’s many pronouncements to support innovation, advance biomedical research, promote job creation and control healthcare costs for seniors, his 2013 budget proposal flies in the face of these important goals.’ He added that ‘proposed mandatory rebates in Medicare Part D are a short-sighted proposition that could destabilize the program and threaten hundreds of thousands of American jobs.’

Mr Castellani said, ‘Medicare Part D is working well for seniors’ reducing costs ‘far below initial projections’ and that ‘we should not disrupt this successful programme’.

The President has also reiterated his aim to promote entry of biosimilar drugs onto the US market and to clamp down on patent settlements which he claims delay the launch of generics. PhRMA reacted with concern to this, with Mr Castellani saying, ‘we are also troubled by the president’s proposal to reduce data protection for innovative biologic medicines, which is critically important to the development of cutting-edge medicines.’

FDA’s budget
President Obama has requested FDA receive a budget of US$4.49 billion, a 17% rise on their 2012 budget, to support the review of generics and biosimilars. However, 98% of this increase in funding would come from user fees paid by drugmakers, increasing industry’s overall contribution to almost half of FDA’s total budget.

‘These are austere budget times and the FDA budget request reflects this reality,’ said Ms Margaret A Hamburg, FDA Commissioner of Food and Drugs. ‘Our budget increases are targeted to strategic areas that will help speed the availability of new medical products, address the challenges of increased globalization and allow FDA to fulfil its public health duties more efficiently.’

Over US$364 million would be spent on supporting generic drug activities and the development of biosimilar products, with generics user fees providing US$299 million and biosimilar user fees providing US$20 million. Meanwhile, US$10m is earmarked to go ‘to enhance collaboration with our Chinese counterparts and increase the agency’s presence in and expertise on China’, FDA said.

The generic pharmaceutical association (GPhA), however, has expressed its concern over the President’s plans to place a ban on patent settlements, as well as the ‘failure to increase appropriated funds to FDA and an expansion of Medicaid rebates’.

Mr Ralph G Neas, President and CEO of GPhA said, ‘the substantial increase in FDA funding shown in the President’s budget request is based almost entirely on user fee funding,’ adding that ‘it is important to emphasize that the funding provided by the user fee programs is in addition to, not a substitute for, congressional appropriations.’

Mr Neas further reiterated that healthcare programmes like Medicaid and Medicare are ‘dependent on the savings generated through the use of generic drugs’, adding that ‘these savings can continue only if Congress sufficiently funds the FDA to assure timely approvals of new generic drugs.’

GPhA does not agree with the President concerning patent settlements, stating that such deals have ‘saved billions of dollars for consumers, businesses and the government’, adding that ‘banning patent settlements would delay competition, and would cut by more than a third the number of new generics that are launched prior to brand patent expiration.’

The President’s budget plans are yet to be approved by Congress.

Related article

Generics and biosimilars affected by Obama’s deficit plans

Source: FDA, GPhA, PhRMA, The White House

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