Pain for pharmas in debt ceiling deal

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The 11th-hour debt ceiling deal now squeaking through Congress will likely mean some pain for the drug and device industries, along with everyone else.

First off, the bill, which mandates immediate cuts of nearly a trillion dollars and an additional $1.5 trillion in cuts to be determined by a bipartisan Congressional committee, will almost certainly hit the FDA's budget.

“Even with user fees, a decline or no increase in FDA's budget can diminish the agency's ability and credibility,” said Wayne Pines, president of regulatory services and healthcare at APCO worldwide. “That is deleterious to the pharma industry, which relies on FDA to assure the integrity of its products.”

The legislation also paints a big target on Medicare and Medicaid, which are spared from round one of the cuts, but will likely bear much of the non-defense portion of cuts — at least half of the total — in round two (here, it gets a little tricky: should the Congressional panel fail to agree on cuts by December, 2012, a “trigger” in the bill mandates automatic, across-the-board cuts of $1.2 trillion exempting Social Security and Medicaid but not the much larger Medicare). Prescription drug spending will be at the top of many lawmakers' lists. The White House used the prohibition on price controls included in the Medicare Part D prescription drug coverage legislation as leverage to enlist the drug industry in its campaign for healthcare reform, with President Obama targeting the provision for $200 billion in savings.

Also on the table will likely be tax deductions on drug advertising, another item the industry fought to preserve in healthcare reform negotiations. Then Ways and Means Committee Chair Rep. Charles Rangel (D-NY) said pulling the exemption for pharmas could reap $37 billion in savings to the government.

“The debt ceiling debate was all about election politics and the future of government spending versus taxation,” said John Kamp, executive director of the Coalition for Healthcare Communication. “The debt issue must be addressed, so expect continued pressure on drug pricing and even more debate about all tax options, including the tax deductibility of healthcare costs.”
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