By EMILY RAMSHAW - The Dallas Morning News - Thursday, December 20, 2007
AUSTIN – House Speaker Tom Craddick has yet to order an interim study on abuse and neglect in Texas' facilities for the mentally retarded – despite saying this summer that curbing the mistreatment was a top priority.
His staff says he's considering appointing a special committee early next year to address the problems, but House Democrats say they can't afford to wait for the state's Republican leadership.
They've convened a legislative study group of their own and begun touring Texas institutions – issuing their first report last week.
"These people are wards of the state, and we are not fulfilling our obligation to protect their safety," said Rep. Lon Burnam, a Fort Worth Democrat who lobbied for a House interim committee but said he couldn't get the support. "I think it's imperative that a study be done. And if the speaker's not going to do an investigation, individual members will."
Texas' care for the disabled came under fire repeatedly this year, with reports of abuse and neglect at state institutions and group homes rivaling conditions in the state's troubled juvenile justice system.
The scrutiny followed a scathing U.S. Justice Department report documenting civil rights violations and horrific living conditions at the Lubbock State School. In the months after that report, The Dallas Morning News documented widespread abuse and neglect at other state institutions for people with disabilities, and vile conditions and debilitating financial problems at dozens of midsize group homes in Dallas County.
Early this week, The News reported that the state's waiting lists for in-home, or non-institutional, care now exceeds 100,000 people – with some families waiting up to a decade for services.
Mr. Craddick first spoke out on the state care facilities in August, saying that improving conditions would be a top priority between legislative sessions. But when his list of interim charges came out this month, the services for the disabled didn't make the cut, leaving advocates to believe they'd been left in the lurch.
Craddick spokeswoman Alexis DeLee said Tuesday that while the speaker hasn't made an interim charge, he is considering appointing a select committee in early 2008 on the services provided to Texas' most profoundly disabled – whether they're in a state school, a private care facility or living in the family home.
House Democrats say they're not holding their breath.
In the meantime, Rep. Garnet Coleman said the legislative study group he chairs is scheduling hearings at state schools – including one next month at the state-operated institution in Denton. They've already released notes on a meeting at the Corpus Christi State School, he said, and plan to have a final report on long-term care for the disabled by November.
Read more in the Dallas Morning News
Friday, December 21, 2007
Friday, December 7, 2007
Medicare drug benefit
By Waxahachie Daily Ligt - Friday, December 7, 2007
The calendar during November and December tends to get a little full. Between Thanksgiving, Christmas and all the festivities in between, often we have more to do than we have time. But one calendar item is essential for any Medicare-eligible senior age 65 and over, the open enrollment season for the Medicare Prescription Drug Benefit.
Running Nov. 15 through Dec. 31, open enrollment allows Medicare recipients to sign up for a prescription drug plan or change their current plan if they so desire. Like the Medicare Prescription Drug Benefit (also known as Medicare Part D), participating in open enrollment season is completely voluntary. Seniors who are happy with the drug coverage they receive from a private plan, or who aren’t interested in signing up for Medicare’s drug benefit by no means have to, and seniors who do have Medicare drug coverage and don’t want to change plans do not need to do anything to continue receiving their coverage.
The prescription drug benefit allows seniors to pick a program that fits their personal health and financial needs. Texas seniors can choose from one of 56 plans during the open enrollment period.
Picking a plan can seem daunting, which is why the Centers for Medicare and Medicaid Services has set up a Web site, www.medicare.gov, and hotline, 1-800-MEDICARE, to assist seniors in comparing plans and selecting the one that is right for them. When using these resources, it’s important to have a list of the medications the senior is taking handy, as it will help determine what plan is right for them. Additional assistance is also available to low-income seniors, so it’s important that these seniors understand the options available to them.
At the conclusion of last year’s open enrollment period, more than 1.4 million Americans had enrolled in the prescription drug benefit. If you or a loved one are eligible and don’t currently have prescription drug coverage or wish to change the coverage you currently have, mark your calendar: Dec. 31, is the last day of open-enrollment. And just like Christmas shopping, it’s best not to wait until the last minute.
The calendar during November and December tends to get a little full. Between Thanksgiving, Christmas and all the festivities in between, often we have more to do than we have time. But one calendar item is essential for any Medicare-eligible senior age 65 and over, the open enrollment season for the Medicare Prescription Drug Benefit.
Running Nov. 15 through Dec. 31, open enrollment allows Medicare recipients to sign up for a prescription drug plan or change their current plan if they so desire. Like the Medicare Prescription Drug Benefit (also known as Medicare Part D), participating in open enrollment season is completely voluntary. Seniors who are happy with the drug coverage they receive from a private plan, or who aren’t interested in signing up for Medicare’s drug benefit by no means have to, and seniors who do have Medicare drug coverage and don’t want to change plans do not need to do anything to continue receiving their coverage.
The prescription drug benefit allows seniors to pick a program that fits their personal health and financial needs. Texas seniors can choose from one of 56 plans during the open enrollment period.
Picking a plan can seem daunting, which is why the Centers for Medicare and Medicaid Services has set up a Web site, www.medicare.gov, and hotline, 1-800-MEDICARE, to assist seniors in comparing plans and selecting the one that is right for them. When using these resources, it’s important to have a list of the medications the senior is taking handy, as it will help determine what plan is right for them. Additional assistance is also available to low-income seniors, so it’s important that these seniors understand the options available to them.
At the conclusion of last year’s open enrollment period, more than 1.4 million Americans had enrolled in the prescription drug benefit. If you or a loved one are eligible and don’t currently have prescription drug coverage or wish to change the coverage you currently have, mark your calendar: Dec. 31, is the last day of open-enrollment. And just like Christmas shopping, it’s best not to wait until the last minute.
Thursday, December 6, 2007
Medicare to Cut Payment for Two Promising Cancer Drugs
By ALEX BERENSON - The New York Times - December 6, 2007
New Medicare rules for a small but promising class of cancer drugs may cause thousands of lymphoma patients to lose access to the treatment, which in some cases is the only therapy available to them.
The companies that make the drugs, and patient advocacy groups, say the changes will sharply cut reimbursement for the medicines next year, and they predict that many hospitals will stop offering the treatments. The Medicare changes come just as new data provide additional evidence that the medicines, called Bexxar and Zevalin, are effective.
The drugs are given to treat non-Hodgkins lymphoma, the fifth-most common cancer, and are usually prescribed for patients who have not responded to other therapies and who have few remaining treatment options. Clinical trial data show that they put the disease into remission for years in many of those patients.
Under the new rules, after Jan. 1, Medicare will reimburse hospitals about $16,000 for each treatment with the drugs, which a patient needs to receive only once. GlaxoSmithKline, which markets Bexxar, say it is priced at almost $30,000 per treatment, and Biogen Idec, which sells Zevalin, says it costs nearly as much. While high, such prices are not unusual for new cancer therapies, which can cost $50,000 or more for a year of treatment.
Senior Medicare officials say they are not trying to prevent hospitals from giving Bexxar and Zevalin. The $16,000 figure is a fair price and is based on the actual prices hospitals have paid for the medicines this year, they say.
Zevalin was introduced in 2002, and Bexxar in 2003. Until now, Medicare has reimbursed each hospital claim individually, without setting a single nationwide price for the drug. The practice has resulted in wildly varying reimbursement, Medicare says.
But the companies say Medicare’s data must be inaccurate and that no hospital will offer the drugs to Medicare patients if it is losing $10,000 or more per treatment. Hospitals typically do not disclose their reimbursement rates, or whether they make money on any given treatment.
Under federal rules, hospitals that do not offer a drug to Medicare patients are barred from offering it to other patients, even if their insurers fully cover the cost of treatment. Because Bexxar and Zevalin contain radioactive material, the drugs must be administered by specially licensed technicians and doctors. They are usually given in hospitals..
Sarah Alspach, a spokeswoman for Glaxo, said the company had voluntarily submitted its pricing data to Medicare to prove that that the hospital claims data is wrong. “Our feeling is there is a flaw in the methodology,” Ms. Alspach said.
Doctors, lymphoma patients, and advocacy groups say they do not understand Medicare’s decision. About 60,000 people are diagnosed with non-Hodgkins lymphoma every year, and 20,000 people die of the disease.
“The explanation that they’re giving is really flawed,” said Dr. Mark Kaminski, the co-director of leukemia and lymphoma transplant program at the University of Michigan. Dr. Kaminski helped discover Bexxar two decades ago and receives a small royalty when the drug is used.
Bexxar and Zevalin are part of a new class of drugs called radioimmunotherapies. They combine a radioactive particle with a biologically engineered molecule that attaches to cancerous white blood cells.
In clinical trials, they have proven as good as or better than standard treatments for non-Hodgkins lymphoma, a cancer of the immune system. In a trial of 414 patients scheduled to be discussed next Monday at a hematology conference, the combination of Zevalin and chemotherapy put lymphoma into remission for three years on average, compared with one year for chemotherapy alone.
Marion Swan, a spokeswoman for the Lymphoma Research Foundation, says the drugs are the only option for some patients. “Our number one concern is that patients have access to all viable treatment options,” she said, “and it looks like this might be denying access.”
The drugs have already faced hurdles because they can require private cancer doctors to transfer their patients to hospitals for the treatments, and the private doctors may view the hospitals as competitors. That problem, and doctors’ general unfamiliarity with the drugs, has left them as niche products used in fewer than 10 percent of patients who are candidates for them.
Advocates for the drugs had hoped that new clinical trial evidence, like the Zevalin data that will be presented next week, would convince more doctors to prescribe them. Now they worry that Medicare’s decision will end most use of the drugs and chill the development of other radioimmunotherapies.
“If you can’t get two products that basically hit home runs into the marketplace, there’s very little incentive for further development,” Dr. Kaminski said.
Herb B. Kuhn, deputy administrator of the Centers for Medicare and Medicaid Services, the agency overseeing Medicare, said that the agency recognized the value of the drugs. But Medicare does not want to overpay for the medicines and believes that hospital data is the most accurate way to set reimbursement, he said.
But most other drugs administered via injection in doctors’ offices or hospital outpatient clinics — as Bexxar and Zevalin are — are not reimbursed on the basis of what hospitals say they have paid. Instead, companies report the average price of their drugs to Medicare. Medicare then reimburses doctors and hospitals at that price, plus a 6 percent fee to cover handling costs.
GlaxoSmithKline said it had asked Medicare to switch to that system for Bexxar. So far, Medicare has refused.
Meanwhile, lymphoma patients are anxiously watching the fight between Medicare and the companies.
Lora Beckwith, 66, was first diagnosed with the disease in 2004. So far, her illness has progressed slowly, but last month, she was told that she would probably need treatment by February.
Because Ms. Beckwith, who lives in Ann Arbor, Mich., has Parkinson’s disease, she cannot receive standard chemotherapy for the disease, making Bexxar and Zevalin among her only alternatives. Now she fears she may not be able to get them.
“I’m not usually a vengeful or resentful person,” she said. “But I am feeling a bit resentful about having this taken away — if I can’t have access to a drug that would extend my life.”
Read more
New Medicare rules for a small but promising class of cancer drugs may cause thousands of lymphoma patients to lose access to the treatment, which in some cases is the only therapy available to them.
The companies that make the drugs, and patient advocacy groups, say the changes will sharply cut reimbursement for the medicines next year, and they predict that many hospitals will stop offering the treatments. The Medicare changes come just as new data provide additional evidence that the medicines, called Bexxar and Zevalin, are effective.
The drugs are given to treat non-Hodgkins lymphoma, the fifth-most common cancer, and are usually prescribed for patients who have not responded to other therapies and who have few remaining treatment options. Clinical trial data show that they put the disease into remission for years in many of those patients.
Under the new rules, after Jan. 1, Medicare will reimburse hospitals about $16,000 for each treatment with the drugs, which a patient needs to receive only once. GlaxoSmithKline, which markets Bexxar, say it is priced at almost $30,000 per treatment, and Biogen Idec, which sells Zevalin, says it costs nearly as much. While high, such prices are not unusual for new cancer therapies, which can cost $50,000 or more for a year of treatment.
Senior Medicare officials say they are not trying to prevent hospitals from giving Bexxar and Zevalin. The $16,000 figure is a fair price and is based on the actual prices hospitals have paid for the medicines this year, they say.
Zevalin was introduced in 2002, and Bexxar in 2003. Until now, Medicare has reimbursed each hospital claim individually, without setting a single nationwide price for the drug. The practice has resulted in wildly varying reimbursement, Medicare says.
But the companies say Medicare’s data must be inaccurate and that no hospital will offer the drugs to Medicare patients if it is losing $10,000 or more per treatment. Hospitals typically do not disclose their reimbursement rates, or whether they make money on any given treatment.
Under federal rules, hospitals that do not offer a drug to Medicare patients are barred from offering it to other patients, even if their insurers fully cover the cost of treatment. Because Bexxar and Zevalin contain radioactive material, the drugs must be administered by specially licensed technicians and doctors. They are usually given in hospitals..
Sarah Alspach, a spokeswoman for Glaxo, said the company had voluntarily submitted its pricing data to Medicare to prove that that the hospital claims data is wrong. “Our feeling is there is a flaw in the methodology,” Ms. Alspach said.
Doctors, lymphoma patients, and advocacy groups say they do not understand Medicare’s decision. About 60,000 people are diagnosed with non-Hodgkins lymphoma every year, and 20,000 people die of the disease.
“The explanation that they’re giving is really flawed,” said Dr. Mark Kaminski, the co-director of leukemia and lymphoma transplant program at the University of Michigan. Dr. Kaminski helped discover Bexxar two decades ago and receives a small royalty when the drug is used.
Bexxar and Zevalin are part of a new class of drugs called radioimmunotherapies. They combine a radioactive particle with a biologically engineered molecule that attaches to cancerous white blood cells.
In clinical trials, they have proven as good as or better than standard treatments for non-Hodgkins lymphoma, a cancer of the immune system. In a trial of 414 patients scheduled to be discussed next Monday at a hematology conference, the combination of Zevalin and chemotherapy put lymphoma into remission for three years on average, compared with one year for chemotherapy alone.
Marion Swan, a spokeswoman for the Lymphoma Research Foundation, says the drugs are the only option for some patients. “Our number one concern is that patients have access to all viable treatment options,” she said, “and it looks like this might be denying access.”
The drugs have already faced hurdles because they can require private cancer doctors to transfer their patients to hospitals for the treatments, and the private doctors may view the hospitals as competitors. That problem, and doctors’ general unfamiliarity with the drugs, has left them as niche products used in fewer than 10 percent of patients who are candidates for them.
Advocates for the drugs had hoped that new clinical trial evidence, like the Zevalin data that will be presented next week, would convince more doctors to prescribe them. Now they worry that Medicare’s decision will end most use of the drugs and chill the development of other radioimmunotherapies.
“If you can’t get two products that basically hit home runs into the marketplace, there’s very little incentive for further development,” Dr. Kaminski said.
Herb B. Kuhn, deputy administrator of the Centers for Medicare and Medicaid Services, the agency overseeing Medicare, said that the agency recognized the value of the drugs. But Medicare does not want to overpay for the medicines and believes that hospital data is the most accurate way to set reimbursement, he said.
But most other drugs administered via injection in doctors’ offices or hospital outpatient clinics — as Bexxar and Zevalin are — are not reimbursed on the basis of what hospitals say they have paid. Instead, companies report the average price of their drugs to Medicare. Medicare then reimburses doctors and hospitals at that price, plus a 6 percent fee to cover handling costs.
GlaxoSmithKline said it had asked Medicare to switch to that system for Bexxar. So far, Medicare has refused.
Meanwhile, lymphoma patients are anxiously watching the fight between Medicare and the companies.
Lora Beckwith, 66, was first diagnosed with the disease in 2004. So far, her illness has progressed slowly, but last month, she was told that she would probably need treatment by February.
Because Ms. Beckwith, who lives in Ann Arbor, Mich., has Parkinson’s disease, she cannot receive standard chemotherapy for the disease, making Bexxar and Zevalin among her only alternatives. Now she fears she may not be able to get them.
“I’m not usually a vengeful or resentful person,” she said. “But I am feeling a bit resentful about having this taken away — if I can’t have access to a drug that would extend my life.”
Read more
Medicare Reform Hits Snag as Administration Threatens Veto if Physician Pay Cut is Reduced
Health groups want Medicare physicians to use electronic prescribing or face financial penalties
By Kaiser Network - Dec. 6, 2007
The Medicare reform package be shaped in the Senate Finance Committee hit a snag yesterday and the Democratic chairman says he needs to consult with House Democrats before proceeding on the legislation. A major piece of the plan is to roll back the 10 percent pay cuts for doctors that Medicare is set to enforce for 2008. Republicans on the committee were fighting for a short-term roll back of the cut when a letter suddenly appeared from the Health and Human Services Secretary that threatened a Bush veto under certain conditions.
Senate Finance Committee Chair Baucus Cancels Medicare Bill Mark Up, Will Negotiate With House Dem
Senate Finance Committee Chair Max Baucus (D-Mont.) on Wednesday canceled plans for a mark up of Medicare legislation and instead will negotiate directly with House Democrats on the measure, CQ HealthBeat reports. The bill would block a 10% cut in Medicare physician fees.
According to CQ HealthBeat, Baucus has "struggled" with committee Republicans over whether to block the physician cuts for one year or two years, as well as on reductions to Medicare Advantage payments to help fund the physician fee fix. Baucus canceled a mark up one day after the Bush administration threatened to veto any bill that includes cuts to MA plans (CQ HealthBeat, 12/5).
HHS Secretary Mike Leavitt on Tuesday in a letter to the Finance Committee wrote that a veto would be recommended for any bill that "results in a loss of access to health care services, benefits or choices" in the MA program; "raises taxes ... to fund spending increases"; or alters Medicare's fiscal status by overturning administration regulatory decisions (Kaiser Daily Health Policy Report, 12/5). (Read text of Leavitt letter below this news story.)
Finance Committee ranking member Chuck Grassley (R-Iowa) on Wednesday said of the veto threat: "What they're really saying is, 'We don't care if the doctors take a 10% cut'" (CQ HealthBeat, 12/5).
E-Prescribing
A coalition of health care and consumer groups announced support for legislation that would require Medicare physicians by 2011 to use electronic prescribing or face financial penalties, CQ HealthBeat reports. The bill's sponsors include Sens. John Kerry (D-Mass.), Debbie Stabenow (D-Mich.) and John Ensign (R-Nev.), and Reps. Allyson Schwartz (D-Pa.) and Jon Porter (R-Nev.).
Bill Vaughan, senior policy analyst at Consumers Union, on Wednesday in a letter to the Senate wrote that the group wants Congress to implement e-prescribing in Medicare and Medicaid and called for the legislation to be included in the Medicare package. The e-prescribing measure would provide physicians with a bonus for each e-prescription written and provide funding for start-up costs associated with adopting the technology. It also would authorize the HHS secretary to provide physicians with one- or two-year hardship waivers if they have difficulty acquiring the technology.
The Bush administration has asked that health information technology adoption requirements be included in any Medicare legislation that would prevent a physician fee cut.
Kerry said, "E-prescribing will save money, save time, save doctors from piles of paperwork and, most importantly, save lives," adding, "Deaths and injuries from handwritten prescriptions could be nearly eliminated if e-prescriptions were adopted on a wide scale. We need to seize this bipartisan opportunity and make this common-sense reform a reality now" (Carey, CQ HealthBeat, 12/5).
Secretary Leavitt Letter to Senators on Medicare Physician Payment Legislation
Text of letter sent to Sen. Max Baucus, chairman, and Sen. Charles Grassley, ranking Republican, on Senate Finance Committee
Read Daily Reports on Kaiser Network.org
By Kaiser Network - Dec. 6, 2007
The Medicare reform package be shaped in the Senate Finance Committee hit a snag yesterday and the Democratic chairman says he needs to consult with House Democrats before proceeding on the legislation. A major piece of the plan is to roll back the 10 percent pay cuts for doctors that Medicare is set to enforce for 2008. Republicans on the committee were fighting for a short-term roll back of the cut when a letter suddenly appeared from the Health and Human Services Secretary that threatened a Bush veto under certain conditions.
Senate Finance Committee Chair Baucus Cancels Medicare Bill Mark Up, Will Negotiate With House Dem
Senate Finance Committee Chair Max Baucus (D-Mont.) on Wednesday canceled plans for a mark up of Medicare legislation and instead will negotiate directly with House Democrats on the measure, CQ HealthBeat reports. The bill would block a 10% cut in Medicare physician fees.
According to CQ HealthBeat, Baucus has "struggled" with committee Republicans over whether to block the physician cuts for one year or two years, as well as on reductions to Medicare Advantage payments to help fund the physician fee fix. Baucus canceled a mark up one day after the Bush administration threatened to veto any bill that includes cuts to MA plans (CQ HealthBeat, 12/5).
HHS Secretary Mike Leavitt on Tuesday in a letter to the Finance Committee wrote that a veto would be recommended for any bill that "results in a loss of access to health care services, benefits or choices" in the MA program; "raises taxes ... to fund spending increases"; or alters Medicare's fiscal status by overturning administration regulatory decisions (Kaiser Daily Health Policy Report, 12/5). (Read text of Leavitt letter below this news story.)
Finance Committee ranking member Chuck Grassley (R-Iowa) on Wednesday said of the veto threat: "What they're really saying is, 'We don't care if the doctors take a 10% cut'" (CQ HealthBeat, 12/5).
E-Prescribing
A coalition of health care and consumer groups announced support for legislation that would require Medicare physicians by 2011 to use electronic prescribing or face financial penalties, CQ HealthBeat reports. The bill's sponsors include Sens. John Kerry (D-Mass.), Debbie Stabenow (D-Mich.) and John Ensign (R-Nev.), and Reps. Allyson Schwartz (D-Pa.) and Jon Porter (R-Nev.).
Bill Vaughan, senior policy analyst at Consumers Union, on Wednesday in a letter to the Senate wrote that the group wants Congress to implement e-prescribing in Medicare and Medicaid and called for the legislation to be included in the Medicare package. The e-prescribing measure would provide physicians with a bonus for each e-prescription written and provide funding for start-up costs associated with adopting the technology. It also would authorize the HHS secretary to provide physicians with one- or two-year hardship waivers if they have difficulty acquiring the technology.
The Bush administration has asked that health information technology adoption requirements be included in any Medicare legislation that would prevent a physician fee cut.
Kerry said, "E-prescribing will save money, save time, save doctors from piles of paperwork and, most importantly, save lives," adding, "Deaths and injuries from handwritten prescriptions could be nearly eliminated if e-prescriptions were adopted on a wide scale. We need to seize this bipartisan opportunity and make this common-sense reform a reality now" (Carey, CQ HealthBeat, 12/5).
Secretary Leavitt Letter to Senators on Medicare Physician Payment Legislation
Text of letter sent to Sen. Max Baucus, chairman, and Sen. Charles Grassley, ranking Republican, on Senate Finance Committee
“We understand the Senate Finance Committee soon intends to consider draft legislation to block the upcoming statutorily mandated reduction in payments to physicians under the fee-for-service Medicare program. As you know, this 10 percent cut would otherwise occur on January 1, 2008. I write to reiterate the Administration's commitment to strengthen and improve Medicare, and to ensure our Nation's seniors continue to have access to, and choices among, high-quality benefits through this important program.
“The Administration looks forward to working with Congress on appropriately offsetting legislation to mitigate the cut to physician reimbursement rates under Medicare. To that end, we ask that Congress adhere to the following principles for an update to the physician fee schedule.
“Such a bill should:
● Pay for any adjustment to the physician fee schedule formula by responsibly adjusting payments to other providers in the fee-for-service Medicare program.
● Bear in mind the impact on beneficiary premiums of potential increases in Part B spending for physicians, when considering appropriate offsets.
● Condition receipt of a portion of any fee adjustment to adoption of certified electronic health information technology. Physicians who do not adopt appropriate, available technology should receive a lower payment than those who do.
● Implement payment policies to ensure patients receive high-quality care in the most medically appropriate and efficient setting without increasing costs for taxpayers or for Medicare and its beneficiaries.
“Conversely, the President's senior advisors would recommend a veto of any bill that:
● Raises taxes on the American people to fund spending increases.
● Results in the loss of access to health care services, benefits, or choices in the Medicare Advantage program, through which nearly 20 percent of seniors and Medicare beneficiaries with disabilities currently receive their benefits.
● Disturbs, undermines, or overturns the many successes of the new Medicare prescription drug benefit.
● Undermines efforts to promote fiscal solvency in the Medicare and Medicaid programs. For example, legislation should not repeal the Medicare funding warning or erode the programs' fiscal integrity by overturning regulatory policies developed by the Administration.
“We look forward to working with you to produce legislation that the President can sign into law. The Office of Management and Budget advises that from the standpoint of the Administration's program, there is no objection to the transmittal of this letter.”
Read Daily Reports on Kaiser Network.org
VIEWPOINT: Myths and Realities about Social Security and Privatization
By National Committee to Preserve Social Security and Medicare - Read More
Senior Advocates Petition Congress to Cut Subsidy to Private Medicare Plans
Medicare reforms being shaped in Senate Finance Committee
Dec. 5, 2007 – Two Medicare advocacy groups poured 48,000 petitions on Congress yesterday as part of their campaign to support Medicare reforms that will halt or reduce the subsidies paid to private Medicare providers. The senior citizens also waived two-dollar bills to symbolize the “extra money” they pay each month in Medicare premiums because of these industry subsidies.
The National Committee to Preserve Social Security and Medicare (NCPSSM) was joined by the Alliance for Retired Americans in delivering the petitions yesterday.
The Senate Finance Committee is considering legislation this week that could include cuts to billions of dollars in subsidies to private insurers. These overpayments will cost the federal government $149 billion dollars over the next decade and cut two years from Medicare's solvency, according to the NCPSSM.
The NCPSSM news release also said, “Seniors want Congress to reduce those subsidies to improve and strengthen Medicare for future generations. Contrary to what the insurance industry claims, cutting industry subsidies is not the same as cutting Medicare.”
"While the President chides Congress for 'wasteful Washington spending', at the same time he and his allies continue to defend providing billions of dollars in subsidies to the insurance industry,” says Max Richtman, NCPSSM Executive Vice President
“Taxpayers and seniors should not have to foot the bill for overpayments to an industry already seeing record profits thanks to the privatization of Medicare. The Medicare Advantage program is the textbook definition of 'wasteful Washington spending' and should be reformed.”
In explaining the $2 bills, Edward F. Coyle, Alliance for Retired Americans Executive Director, said, "While each $2 bill may seem minor on its own, the total cost is significant. And so is the total effect on seniors. Each month, private insurance companies keep getting more, while seniors keep getting less.”
Earlier this fall, National Committee members and supporters mailed 73,000 letters to Congress requesting Medicare improvements. Several other petition drives and member surveys on Medicare are currently underway for delivery to Congress later this year or early 2008, according to NCPSSM.
Editor’s Notes:
The National Committee says it is a nonprofit, nonpartisan organization that acts in the interests of its membership through advocacy, education, services, grassroots efforts and the leadership of the Board of Directors and professional staff. The work of the National Committee is directed toward developing better-informed citizens and voters.
Medicare Package Taking Shape in Congress, HHS Secretary Makes Requests
Senate Finance Committee taking the lead on Medicare reform
Dec. 4, 2007 - HHS Secretary Mike Leavitt on Monday issued a statement to Congress requesting that Medicare legislation not include cuts to Medicare Advantage plans or changes to the Medicare prescription drug benefit, CQ Today reports. Leavitt in the statement said, "Both have proven to be highly popular with the American people and worthy of continued support from Congress."
A mark up of the Medicare package is tentatively scheduled for Wednesday, but the Senate Finance Committee might delay the mark up by at least one day, according to a spokesperson for committee ranking member Chuck Grassley (R-Iowa) (Armstrong, CQ Today, 12/3).
MA plan payments on average are 12% higher than traditional Medicare. The Senate Medicare bill is expected to reduce some additional payments to MA plans to generate revenue, while the House measure would make MA payments equal to traditional Medicare to generate $50 billion over five years.
The Bush administration last week during a meeting with Senate Finance Committee staffers said that it also opposes a provision of the Medicare legislation that would give states more power to penalize private MA plans that use questionable marketing tactics.
According to CongressDaily, "The White House's protest came as a surprise to negotiators, who inserted the new marketing language in response to reports that private [MA] plans were using misleading marketing tactics to get seniors to switch from traditional Medicare by enrolling in the private fee-for-service plans." The package, which could be released as early as Tuesday, would curb a scheduled 10% cut to physician reimbursements. It also is expected to have provisions that change the drug benefit and create rural and low-income subsidies.
Health IT
Leavitt also said that "any new bill should require physicians to implement health information technology that meets department standards in order to be eligible for higher payments from Medicare" (Johnson, CongressDaily, 12/4).
Leavitt said Congress should require physicians to adopt health IT that meets federal standards before it stops a scheduled 10% cut in Medicare physician fees. "Such a requirement would accelerate adoption of this technology considerably and help to drive improvements in health care quality as well as reductions in medical costs and errors," according to Leavitt.
He added, "I'm confident that many members of Congress are of a like mind of this issue, and I will actively work with them in the near future" (CQ HealthBeat, 12/3).
According to the AP/Philadelphia Inquirer, health care analysts have said widespread use of electronic health records will reduce medical errors and could help reduce health care costs. Currently, only 10% of small-group practices and solo physicians use EHRs, the AP/Inquirer reports. The systems can cost anywhere from $20,000 to $40,000 up front, according to the AP/Inquirer (Freking, AP/Philadelphia Inquirer, 12/3).
Sen. Edward Kennedy (D-Mass.) has sponsored a health IT bill (S 1693) that he is trying to get passed before the end of the session, but the Finance Committee has not discussed health IT as part of the Medicare package, CQ Today reports (CQ Today, 12/3).
E-Prescribing
Sens. John Kerry (D-Mass.) and Debbie Stabenow (D-Mich.) plan to introduce stand-alone legislation this week that would require handwritten prescriptions be replaced by electronic prescriptions, but the senators are working with Finance Committee Chair Max Baucus (D-Mont.) and Grassley to add the requirement to the Medicare package, aides said, CongressDaily reports.
The American Medical Association is "wary of an e-prescribing mandate," and its main priority is reversing the 10% physician payment cut, according to CongressDaily.
The Finance Committee package would include one-time payments for physicians to cover the start-up costs and small incentive payments to continue using the systems over three years. Switching to e-prescribing would cost about $2,500 plus losses in productivity during the transition, CongressDaily reports. After three years, physicians would be penalized for not using e-prescribing. Using the technology would save between $5 billion and $15 billion over 10 years, according to some estimates.
"Physicians are eager to adopt new technologies that have the potential to increase patient safety and quality of care, but hitting doctors with an unfunded e-prescribing mandate at the same time the government plans to cut Medicare physician payments 10% next year is untenable," AMA Board Chair Edward Langston said (Johnson [1], CongressDaily, 12/3).
Other Provisions
The Finance Committee has stalled negotiations on a provision of the package that would extend the length of time employers must cover kidney dialysis for employees after a business coalition ran advertisements in a Montana newspaper opposing increased responsibility for employers, according to an aide familiar with the negotiations, CongressDaily reports.
The ad ran in the Billings Gazette and was paid for by the Employers Coalition on Medicare. Under current law, employees with group insurance must receive 30 months of dialysis before Medicare coverage begins. The extension would increase the requirement to 42 months, which would save Medicare $1.2 billion over 10 years, according to the Congressional Budget Office.
Employers say that the change would cost them $3 billion to $4 billion over 10 years because they do not have the purchasing power Medicare has. Baucus was considering removing the requirement from the legislation, but he might be "less inclined to sympathize" with the coalition after the ads ran, according to CongressDaily (Johnson [2], CongressDaily, 12/3).
Read More
Dec. 5, 2007 – Two Medicare advocacy groups poured 48,000 petitions on Congress yesterday as part of their campaign to support Medicare reforms that will halt or reduce the subsidies paid to private Medicare providers. The senior citizens also waived two-dollar bills to symbolize the “extra money” they pay each month in Medicare premiums because of these industry subsidies.
The National Committee to Preserve Social Security and Medicare (NCPSSM) was joined by the Alliance for Retired Americans in delivering the petitions yesterday.
The Senate Finance Committee is considering legislation this week that could include cuts to billions of dollars in subsidies to private insurers. These overpayments will cost the federal government $149 billion dollars over the next decade and cut two years from Medicare's solvency, according to the NCPSSM.
The NCPSSM news release also said, “Seniors want Congress to reduce those subsidies to improve and strengthen Medicare for future generations. Contrary to what the insurance industry claims, cutting industry subsidies is not the same as cutting Medicare.”
"While the President chides Congress for 'wasteful Washington spending', at the same time he and his allies continue to defend providing billions of dollars in subsidies to the insurance industry,” says Max Richtman, NCPSSM Executive Vice President
“Taxpayers and seniors should not have to foot the bill for overpayments to an industry already seeing record profits thanks to the privatization of Medicare. The Medicare Advantage program is the textbook definition of 'wasteful Washington spending' and should be reformed.”
In explaining the $2 bills, Edward F. Coyle, Alliance for Retired Americans Executive Director, said, "While each $2 bill may seem minor on its own, the total cost is significant. And so is the total effect on seniors. Each month, private insurance companies keep getting more, while seniors keep getting less.”
Earlier this fall, National Committee members and supporters mailed 73,000 letters to Congress requesting Medicare improvements. Several other petition drives and member surveys on Medicare are currently underway for delivery to Congress later this year or early 2008, according to NCPSSM.
Editor’s Notes:
The National Committee says it is a nonprofit, nonpartisan organization that acts in the interests of its membership through advocacy, education, services, grassroots efforts and the leadership of the Board of Directors and professional staff. The work of the National Committee is directed toward developing better-informed citizens and voters.
Medicare Package Taking Shape in Congress, HHS Secretary Makes Requests
Senate Finance Committee taking the lead on Medicare reform
Dec. 4, 2007 - HHS Secretary Mike Leavitt on Monday issued a statement to Congress requesting that Medicare legislation not include cuts to Medicare Advantage plans or changes to the Medicare prescription drug benefit, CQ Today reports. Leavitt in the statement said, "Both have proven to be highly popular with the American people and worthy of continued support from Congress."
A mark up of the Medicare package is tentatively scheduled for Wednesday, but the Senate Finance Committee might delay the mark up by at least one day, according to a spokesperson for committee ranking member Chuck Grassley (R-Iowa) (Armstrong, CQ Today, 12/3).
MA plan payments on average are 12% higher than traditional Medicare. The Senate Medicare bill is expected to reduce some additional payments to MA plans to generate revenue, while the House measure would make MA payments equal to traditional Medicare to generate $50 billion over five years.
The Bush administration last week during a meeting with Senate Finance Committee staffers said that it also opposes a provision of the Medicare legislation that would give states more power to penalize private MA plans that use questionable marketing tactics.
According to CongressDaily, "The White House's protest came as a surprise to negotiators, who inserted the new marketing language in response to reports that private [MA] plans were using misleading marketing tactics to get seniors to switch from traditional Medicare by enrolling in the private fee-for-service plans." The package, which could be released as early as Tuesday, would curb a scheduled 10% cut to physician reimbursements. It also is expected to have provisions that change the drug benefit and create rural and low-income subsidies.
Health IT
Leavitt also said that "any new bill should require physicians to implement health information technology that meets department standards in order to be eligible for higher payments from Medicare" (Johnson, CongressDaily, 12/4).
Leavitt said Congress should require physicians to adopt health IT that meets federal standards before it stops a scheduled 10% cut in Medicare physician fees. "Such a requirement would accelerate adoption of this technology considerably and help to drive improvements in health care quality as well as reductions in medical costs and errors," according to Leavitt.
He added, "I'm confident that many members of Congress are of a like mind of this issue, and I will actively work with them in the near future" (CQ HealthBeat, 12/3).
According to the AP/Philadelphia Inquirer, health care analysts have said widespread use of electronic health records will reduce medical errors and could help reduce health care costs. Currently, only 10% of small-group practices and solo physicians use EHRs, the AP/Inquirer reports. The systems can cost anywhere from $20,000 to $40,000 up front, according to the AP/Inquirer (Freking, AP/Philadelphia Inquirer, 12/3).
Sen. Edward Kennedy (D-Mass.) has sponsored a health IT bill (S 1693) that he is trying to get passed before the end of the session, but the Finance Committee has not discussed health IT as part of the Medicare package, CQ Today reports (CQ Today, 12/3).
E-Prescribing
Sens. John Kerry (D-Mass.) and Debbie Stabenow (D-Mich.) plan to introduce stand-alone legislation this week that would require handwritten prescriptions be replaced by electronic prescriptions, but the senators are working with Finance Committee Chair Max Baucus (D-Mont.) and Grassley to add the requirement to the Medicare package, aides said, CongressDaily reports.
The American Medical Association is "wary of an e-prescribing mandate," and its main priority is reversing the 10% physician payment cut, according to CongressDaily.
The Finance Committee package would include one-time payments for physicians to cover the start-up costs and small incentive payments to continue using the systems over three years. Switching to e-prescribing would cost about $2,500 plus losses in productivity during the transition, CongressDaily reports. After three years, physicians would be penalized for not using e-prescribing. Using the technology would save between $5 billion and $15 billion over 10 years, according to some estimates.
"Physicians are eager to adopt new technologies that have the potential to increase patient safety and quality of care, but hitting doctors with an unfunded e-prescribing mandate at the same time the government plans to cut Medicare physician payments 10% next year is untenable," AMA Board Chair Edward Langston said (Johnson [1], CongressDaily, 12/3).
Other Provisions
The Finance Committee has stalled negotiations on a provision of the package that would extend the length of time employers must cover kidney dialysis for employees after a business coalition ran advertisements in a Montana newspaper opposing increased responsibility for employers, according to an aide familiar with the negotiations, CongressDaily reports.
The ad ran in the Billings Gazette and was paid for by the Employers Coalition on Medicare. Under current law, employees with group insurance must receive 30 months of dialysis before Medicare coverage begins. The extension would increase the requirement to 42 months, which would save Medicare $1.2 billion over 10 years, according to the Congressional Budget Office.
Employers say that the change would cost them $3 billion to $4 billion over 10 years because they do not have the purchasing power Medicare has. Baucus was considering removing the requirement from the legislation, but he might be "less inclined to sympathize" with the coalition after the ads ran, according to CongressDaily (Johnson [2], CongressDaily, 12/3).
Read More
Medicare Help on Part D sign-up
By THE WASHINGTON POST - Tuesday, December 4, 2007
Medicare beneficiaries signing up for prescription drug coverage (Medicare Part D) now through Dec. 31 have a new Web tool to help them compare plans and costs.
Called Plan Finder, the Medicare site lists premiums, co-pays and deductibles by state.
Under Medicare regulations, insurers can't change tier prices before 2009 but can move drugs from tier to tier.
But according to the Medicare Rights Center in New York, if you're on the drug before its tier changes, you can continue paying the cheaper price.
Hassles? Call Medicare (800-633-4227).
SOURCES OF HELP
Plan Finder: From Medicare's home page, www.medicare.gov, click on "Medicare Prescription Drug Plans -- 2008 Plan Data."
A comprehensive list of resources for Medicare Part D comes from the staff of Rep. Peter DeFazio, D-Ore.: www.defazio.house.gov.
Medicare: For tips and information, go to www.medicare.gov/medicarereform/drugbenefit.asp.
Medicare Access for Patients-Rx, a coalition of groups providing guidance to people with chronic diseases and disabilities: www.maprx.info.
AARP Medicare Interactive Counselor: www.aarp.org/health/medicare.
Families USA: www.familiesusa.org/issues/medicare/rx-drug-center/for-consumers.
A Kaiser Family Foundation tracker site lets you compare drug plans: www.kff.org/medicare/healthplantracker/index.jsp.
Read more
Medicare Rights Center: www.medicarerights.org. See "A guide through the Medicare maze."
Medicare beneficiaries signing up for prescription drug coverage (Medicare Part D) now through Dec. 31 have a new Web tool to help them compare plans and costs.
Called Plan Finder, the Medicare site lists premiums, co-pays and deductibles by state.
Under Medicare regulations, insurers can't change tier prices before 2009 but can move drugs from tier to tier.
But according to the Medicare Rights Center in New York, if you're on the drug before its tier changes, you can continue paying the cheaper price.
Hassles? Call Medicare (800-633-4227).
SOURCES OF HELP
Plan Finder: From Medicare's home page, www.medicare.gov, click on "Medicare Prescription Drug Plans -- 2008 Plan Data."
A comprehensive list of resources for Medicare Part D comes from the staff of Rep. Peter DeFazio, D-Ore.: www.defazio.house.gov.
Medicare: For tips and information, go to www.medicare.gov/medicarereform/drugbenefit.asp.
Medicare Access for Patients-Rx, a coalition of groups providing guidance to people with chronic diseases and disabilities: www.maprx.info.
AARP Medicare Interactive Counselor: www.aarp.org/health/medicare.
Families USA: www.familiesusa.org/issues/medicare/rx-drug-center/for-consumers.
A Kaiser Family Foundation tracker site lets you compare drug plans: www.kff.org/medicare/healthplantracker/index.jsp.
Read more
Medicare Rights Center: www.medicarerights.org. See "A guide through the Medicare maze."
Big Pharma Faces Grim Prognosis
Industry Fails to Find New Drugs to Replace Wonders Like Lipitor
By BARBARA MARTINEZ and JACOB GOLDSTEIN - The Wall Street Journal - December 6, 2007
Over the next few years, the pharmaceutical business will hit a wall.
Some of the top-selling drugs in industry history will become history as patent protections expire, allowing generics to rush in at much-lower prices. Generic competition is expected to wipe $67 billion from top companies' annual U.S. sales between 2007 and 2012 as more than three dozen drugs lose patent protection. That is roughly half of the companies' combined 2007 U.S. sales
At the same time, the industry's science engine has stalled. The century-old approach of finding chemicals to treat diseases is producing fewer and fewer drugs. Especially lacking are new blockbusters to replace old ones like Lipitor, Plavix and Zyprexa.
The coming sales decline may signal the end of a once-revered way of doing business. "I think the industry is doomed if we don't change," says Sidney Taurel, chairman of Eli Lilly & Co. Just yesterday, Bristol-Myers Squibb Co. announced plans to cut 10% of its work force, or about 4,300 jobs, and close or sell about half of its 27 manufacturing plants by 2010. (Please see related article.)
Between 2011 and 2012, annual industry revenue will decline, estimates Datamonitor, a research and consulting firm. That would be the first decline in at least four decades.
Patent expirations are a big problem. Drugs are granted 20 years of patent protection, although companies often fail to get a product to market before half of that period has elapsed. Once it hits the market, however, the patent-protected drug is highly profitable: Typical gross margins are 90% to 95%. When patents expire, generic makers offer the products at a price much closer to the cost of production.
Pfizer Inc. will be particularly hard-hit when the patent expires as early as 2010 on Lipitor, the cholesterol-lowering blockbuster that ranks as the most successful drug ever. Pharmacists and managed-care companies will aggressively fill prescriptions with generics, reducing annual Lipitor sales to a fraction of last year's $13 billion.
By 2012, Merck & Co. will face generic competition to its three top-selling drugs: the osteoporosis treatment Fosamax, Singulair for asthma and the blood-pressure drug Cozaar. Those three represent 44% of the company's current revenue. Following the loss last year of patent protection for Merck's cholesterol-lowering Zocor, sales this year are expected to fall 82% from $4.38 billion in 2005. A Merck spokeswoman said the company has several products in the pipeline that will offset its patent losses.
The rise of generics wouldn't matter so much if research labs were creating a stream of new hits. But that isn't happening. During the five years from 2002 through 2006, the industry brought to market 43% fewer new chemical-based drugs than in the last five years of the 1990s, despite more than doubling research-and-development spending.
In October, Moody's Investors Service, which rates about $90 billion in U.S. pharmaceutical-company debt, lowered its outlook for the U.S. drug industry to negative from stable. The industry was long considered among the most credit-worthy, but in recent years, Moody's has downgraded giants Schering-Plough Corp., Merck, Bristol-Myers, Pfizer and GlaxoSmithKline PLC. In explaining its diminished outlook, Moody's said that drugs currently in development don't have as much commercial potential as earlier pipelines.
Investors, once huge beneficiaries of drug-industry success, have moved to the sidelines. As the Dow Jones World Index rose 75% in the six years ended Nov. 29, the FTSE Global Pharmaceuticals Index fell 19.8%.
While many patients are benefiting from lower-cost generics, others are waiting in vain for relief of their suffering. "In anxiety disorder, the field has imploded in terms of drug development," said P. Murali Doraiswamy, chief of biological psychiatry at Duke University medical school. "Ten years ago, we had eight or nine different" anxiety-disorder drugs under development, but that has now "come to a halt."
At last month's big American Heart Association meeting in Orlando, Fla., there were just two high-profile studies of experimental drugs on the agenda. One, for Eli Lilly's anti-blood-clotting drug prasugrel, posted results that left some doctors and analysts questioning whether the drug would be a big seller. Lilly, however, says it is "very pleased with the trial's outcome."
The other study was a postmortem on Pfizer's torcetrapib, already known as one of the industry's most costly failures, with $800 million in budgeted research costs.
"There haven't been any new therapies that are proven to reduce death and disability for atherosclerosis since the introduction of the [cholesterol-lowering] statins" in the late 1980s, said Richard C. Pasternak, vice president of Cardiovascular Clinical Research at Merck. Atherosclerosis, a buildup of arterial plaque, is a major cause of heart disease.
As patent expirations loom, pharmaceutical companies are reorganizing. In five years, many may look very different. They will be in new businesses. Their cost structures may be slimmer and more flexible. Some familiar names may disappear in mergers. Companies are installing new leaders, including outsiders like Pfizer Chairman and CEO Jeffrey Kindler, who in 2002 joined the company as general counsel from McDonald's Corp.
"The era that created the modern pharmaceutical industry is in fact over," said Richard Evans, a former Wall Street analyst and now a pharmaceutical consultant.
To be sure, the pharmaceutical industry is still highly profitable. Sales will continue to benefit from the Medicare drug benefit for the elderly and from growth in overseas markets. The industry will continue to produce new drugs, though at too slow a rate to sustain its size and cost structure, analysts assess. Some players, such as Merck, may fare better because of a more productive R&D operation, according to Sanford C. Bernstein & Co. research analyst Timothy Anderson.
It has never been easy to take a drug from the lab, through animal testing and into human trials. The industry estimates only one out of every 5,000 to 10,000 candidates makes it to human trials. And many drugs that work beautifully in animals fail miserably in people.
But those odds seem to have worsened in recent years, prompting debate about whether the cause is government regulation, corporate structure or an excessive scientific reliance on chemicals rather than biology.
Many drug-company executives blame the FDA for pulling back on approvals. "Very few products are being approved today," said Bernard Poussot, incoming chief executive of Wyeth. The heightened scrutiny contributed to delays of two Wyeth products this past summer, the company has said.
Would-be blockbusters such as Novartis AG's diabetes drug Galvus and Sanofi-Aventis's weight-loss drug rimonabant have recently been delayed by the FDA over safety concerns.
Safety concerns have also prompted the agency to require larger studies of new drugs. Novartis CEO Daniel Vasella says this trend has done more than any other to drive up the industry's R&D costs. He cites Novartis's blood-pressure drug Tekturna, approved earlier this year, which had more than 6,000 patients in its late-stage trial. A decade ago, a similar study might have had fewer than 1,000 patients, according to Dr. Vasella.
Christopher DiFrancesco, a spokesman for the FDA, said, "The number of approvals have declined because companies are submitting fewer drugs to the FDA for approval. The threshold for what we consider to be a safe, effective drug hasn't changed."
Some say the industry's ballooning research budgets may be working against productivity. Most companies use a centralized system to allocate research money, and the growing budgets have left the decision making to too few people who are too far removed from the research, suggests Mr. Evans, who worked at Roche's U.S. subsidiary until 1998, spent several years as a Wall Street analyst and is now a consultant at a health-care-consulting firm. He calls the system "a nightmare of complexity."
As evidence of this problem, some in the industry point to Pfizer, with an annual research budget that has grown to $7 billion, highest in the industry. Yet only a handful of drugs discovered in its internal research labs have come to market in the past decade. And late last year, the company lost its most promising hope when the cholesterol drug torcetrapib failed in late-stage trials.
In a statement, Pfizer said it has the largest pipeline of midstage drugs in company history and plans to triple the number of late-stage drugs in its portfolio by 2009.
A few companies, notably GlaxoSmithKline, have begun breaking R&D into smaller groups, though it is too early to gauge results.
Some believe the industry, which grew out of the European chemical business of the late 1800s, has remained too reliant on that foundation. "For all our amazing advances in the last 50 years, we are still working with the tools of the first pharmaceutical revolution...using advanced chemistry to treat disease symptoms," Mr. Taurel of Lilly said in a 2003 speech.
The future, many believe, lies in biotechnology. Unlike traditional, chemistry-based drug development, biotechnology uses biological tools to create entire proteins, often similar to those that occur in the human body. This approach has yielded successful drugs to treat diseases such as anemia, cancer and rheumatoid arthritis.
Biotech drugs are especially appealing because they face no competition from generics: No regulatory pathway yet exists in the U.S. for bringing to market generic biotech drugs. So until Congress creates such a pathway, no generic threat will exist to the $4,400 a month that Genentech Inc. charges for its cancer drug Avastin, or the $200,000 a year that Genzyme Corp. gets for Cerezyme to treat Gaucher disease. And biotechnology products tend to target specialized areas of medicine that don't require mass advertising or armies of salespeople.
So big pharmaceutical companies have spent nearly $76 billion since 2005 to buy biotech companies, according to Health Care M&A Information Service, a unit of Irving Levin Associates Inc., a Norwalk, Conn., research company. While in 2005 there were 33 deals amounting to $16.5 billion, in the first nine months of this year there were 49 deals totaling $28.7 billion, including AstraZeneca PLC's $15.6 billion acquisition of MedImmune, which followed a bidding war against Eli Lilly, among others.
Meanwhile, Novartis and Pfizer recently announced the formation of in-house biotech units.
The dearth of new products has led the industry to invest heavily in marketing and legal tactics that squeeze as much revenue as possible out of existing products. Companies have raised prices; the average price per pill has risen 63% since 2002, according to Michael Krensavage, Raymond James analyst. Companies raised advertising spending to $5.3 billion in 2006 from $2.5 billion in 2001 and since 1995 have nearly tripled the number of industry sales representatives to 100,000.
The industry spent $155 million on lobbying from January 2005 to June 2006, according to the Center for Public Integrity, on "a variety of issues ranging from protecting lucrative drug patents to keeping lower-priced Canadian drugs from being imported." The industry also successfully lobbied against allowing the federal government to negotiate Medicare drug prices, the center said. The lobbying has drawn fire from politicians, doctors and payers, and damaged the industry's public image.
Aware that seven of the top 10 drug launches of 2006 were generics, pharmaceutical giants are pushing more deeply into that business. In first nine months of this year, Novartis's generics unit, Sandoz, grew roughly three times as fast as its branded-drugs business and accounted for nearly 20% of overall revenue. "The balance is changing," says Novartis CEO Dr. Vasella. In the coming quarters, "we will continue to see a faster growth opportunity" in generics.
After Pfizer's antidepressant Zoloft went off-patent last year, the company's own generics unit, Greenstone, launched a generic version of the drug.
Johnson & Johnson has its own generics unit. Other companies cut deals with generics manufacturers, licensing them the right to sell "authorized generics" that are identical to a branded drug that has gone off-patent.
Diversification is another hope. Roche Holding AG is pursuing a $3 billion hostile takeover of Ventana Medical Systems Inc., a diagnostics company that makes the test used to determine whether women with breast cancer should receive Herceptin, a targeted biotechnology drug that Roche sells in some markets.
The bid is part of a broad push further into diagnostics by the company, which said in July that Severin Schwan, who runs the company's diagnostics unit, will take over next year as CEO.
Yet none of these moves are forestalling cost slashing. Pfizer is cutting 20% of its sales force, AstraZeneca is cutting 10% of its employees and Johnson & Johnson is shrinking its staff by 4%, according to Bernstein Research. As many as 50,000 industry positions will be displaced over the next 10 years, according to wealth-management company RegentAtlantic Capital, Chatham, N.J.
AstraZeneca, GlaxoSmithKline and Bristol-Myers Squibb have also recently suggested they will outsource at least some of their manufacturing. "There are lots of people in India, China and Eastern Europe who can make products of the same quality as ours but at significantly less cost," says Bristol-Myers Squibb CEO James Cornelius.
The outsourcing is expected to extend to research. "We don't do any basic research yet in the lower-cost countries, but over the next few years, to be successful you'll have a constant emphasis on looking for that," Mr. Cornelius says.
The coming difficulty is threatening every industry tradition. "I'm talking to you from the 44th floor of an office on Park Avenue," Mr. Cornelius says. "A year from now, I won't be talking to you from the 44th floor because we're going to move downstairs out of these very expensive offices."
--Sarah Rubenstein and Ron Winslow contributed to this article.
Read more
See Sortable Chart for drugs going off patent.
By BARBARA MARTINEZ and JACOB GOLDSTEIN - The Wall Street Journal - December 6, 2007
Over the next few years, the pharmaceutical business will hit a wall.
Some of the top-selling drugs in industry history will become history as patent protections expire, allowing generics to rush in at much-lower prices. Generic competition is expected to wipe $67 billion from top companies' annual U.S. sales between 2007 and 2012 as more than three dozen drugs lose patent protection. That is roughly half of the companies' combined 2007 U.S. sales
At the same time, the industry's science engine has stalled. The century-old approach of finding chemicals to treat diseases is producing fewer and fewer drugs. Especially lacking are new blockbusters to replace old ones like Lipitor, Plavix and Zyprexa.
The coming sales decline may signal the end of a once-revered way of doing business. "I think the industry is doomed if we don't change," says Sidney Taurel, chairman of Eli Lilly & Co. Just yesterday, Bristol-Myers Squibb Co. announced plans to cut 10% of its work force, or about 4,300 jobs, and close or sell about half of its 27 manufacturing plants by 2010. (Please see related article.)
Between 2011 and 2012, annual industry revenue will decline, estimates Datamonitor, a research and consulting firm. That would be the first decline in at least four decades.
Patent expirations are a big problem. Drugs are granted 20 years of patent protection, although companies often fail to get a product to market before half of that period has elapsed. Once it hits the market, however, the patent-protected drug is highly profitable: Typical gross margins are 90% to 95%. When patents expire, generic makers offer the products at a price much closer to the cost of production.
Pfizer Inc. will be particularly hard-hit when the patent expires as early as 2010 on Lipitor, the cholesterol-lowering blockbuster that ranks as the most successful drug ever. Pharmacists and managed-care companies will aggressively fill prescriptions with generics, reducing annual Lipitor sales to a fraction of last year's $13 billion.
By 2012, Merck & Co. will face generic competition to its three top-selling drugs: the osteoporosis treatment Fosamax, Singulair for asthma and the blood-pressure drug Cozaar. Those three represent 44% of the company's current revenue. Following the loss last year of patent protection for Merck's cholesterol-lowering Zocor, sales this year are expected to fall 82% from $4.38 billion in 2005. A Merck spokeswoman said the company has several products in the pipeline that will offset its patent losses.
The rise of generics wouldn't matter so much if research labs were creating a stream of new hits. But that isn't happening. During the five years from 2002 through 2006, the industry brought to market 43% fewer new chemical-based drugs than in the last five years of the 1990s, despite more than doubling research-and-development spending.
In October, Moody's Investors Service, which rates about $90 billion in U.S. pharmaceutical-company debt, lowered its outlook for the U.S. drug industry to negative from stable. The industry was long considered among the most credit-worthy, but in recent years, Moody's has downgraded giants Schering-Plough Corp., Merck, Bristol-Myers, Pfizer and GlaxoSmithKline PLC. In explaining its diminished outlook, Moody's said that drugs currently in development don't have as much commercial potential as earlier pipelines.
Investors, once huge beneficiaries of drug-industry success, have moved to the sidelines. As the Dow Jones World Index rose 75% in the six years ended Nov. 29, the FTSE Global Pharmaceuticals Index fell 19.8%.
While many patients are benefiting from lower-cost generics, others are waiting in vain for relief of their suffering. "In anxiety disorder, the field has imploded in terms of drug development," said P. Murali Doraiswamy, chief of biological psychiatry at Duke University medical school. "Ten years ago, we had eight or nine different" anxiety-disorder drugs under development, but that has now "come to a halt."
At last month's big American Heart Association meeting in Orlando, Fla., there were just two high-profile studies of experimental drugs on the agenda. One, for Eli Lilly's anti-blood-clotting drug prasugrel, posted results that left some doctors and analysts questioning whether the drug would be a big seller. Lilly, however, says it is "very pleased with the trial's outcome."
The other study was a postmortem on Pfizer's torcetrapib, already known as one of the industry's most costly failures, with $800 million in budgeted research costs.
"There haven't been any new therapies that are proven to reduce death and disability for atherosclerosis since the introduction of the [cholesterol-lowering] statins" in the late 1980s, said Richard C. Pasternak, vice president of Cardiovascular Clinical Research at Merck. Atherosclerosis, a buildup of arterial plaque, is a major cause of heart disease.
As patent expirations loom, pharmaceutical companies are reorganizing. In five years, many may look very different. They will be in new businesses. Their cost structures may be slimmer and more flexible. Some familiar names may disappear in mergers. Companies are installing new leaders, including outsiders like Pfizer Chairman and CEO Jeffrey Kindler, who in 2002 joined the company as general counsel from McDonald's Corp.
"The era that created the modern pharmaceutical industry is in fact over," said Richard Evans, a former Wall Street analyst and now a pharmaceutical consultant.
To be sure, the pharmaceutical industry is still highly profitable. Sales will continue to benefit from the Medicare drug benefit for the elderly and from growth in overseas markets. The industry will continue to produce new drugs, though at too slow a rate to sustain its size and cost structure, analysts assess. Some players, such as Merck, may fare better because of a more productive R&D operation, according to Sanford C. Bernstein & Co. research analyst Timothy Anderson.
It has never been easy to take a drug from the lab, through animal testing and into human trials. The industry estimates only one out of every 5,000 to 10,000 candidates makes it to human trials. And many drugs that work beautifully in animals fail miserably in people.
But those odds seem to have worsened in recent years, prompting debate about whether the cause is government regulation, corporate structure or an excessive scientific reliance on chemicals rather than biology.
Many drug-company executives blame the FDA for pulling back on approvals. "Very few products are being approved today," said Bernard Poussot, incoming chief executive of Wyeth. The heightened scrutiny contributed to delays of two Wyeth products this past summer, the company has said.
Would-be blockbusters such as Novartis AG's diabetes drug Galvus and Sanofi-Aventis's weight-loss drug rimonabant have recently been delayed by the FDA over safety concerns.
Safety concerns have also prompted the agency to require larger studies of new drugs. Novartis CEO Daniel Vasella says this trend has done more than any other to drive up the industry's R&D costs. He cites Novartis's blood-pressure drug Tekturna, approved earlier this year, which had more than 6,000 patients in its late-stage trial. A decade ago, a similar study might have had fewer than 1,000 patients, according to Dr. Vasella.
Christopher DiFrancesco, a spokesman for the FDA, said, "The number of approvals have declined because companies are submitting fewer drugs to the FDA for approval. The threshold for what we consider to be a safe, effective drug hasn't changed."
Some say the industry's ballooning research budgets may be working against productivity. Most companies use a centralized system to allocate research money, and the growing budgets have left the decision making to too few people who are too far removed from the research, suggests Mr. Evans, who worked at Roche's U.S. subsidiary until 1998, spent several years as a Wall Street analyst and is now a consultant at a health-care-consulting firm. He calls the system "a nightmare of complexity."
As evidence of this problem, some in the industry point to Pfizer, with an annual research budget that has grown to $7 billion, highest in the industry. Yet only a handful of drugs discovered in its internal research labs have come to market in the past decade. And late last year, the company lost its most promising hope when the cholesterol drug torcetrapib failed in late-stage trials.
In a statement, Pfizer said it has the largest pipeline of midstage drugs in company history and plans to triple the number of late-stage drugs in its portfolio by 2009.
A few companies, notably GlaxoSmithKline, have begun breaking R&D into smaller groups, though it is too early to gauge results.
Some believe the industry, which grew out of the European chemical business of the late 1800s, has remained too reliant on that foundation. "For all our amazing advances in the last 50 years, we are still working with the tools of the first pharmaceutical revolution...using advanced chemistry to treat disease symptoms," Mr. Taurel of Lilly said in a 2003 speech.
The future, many believe, lies in biotechnology. Unlike traditional, chemistry-based drug development, biotechnology uses biological tools to create entire proteins, often similar to those that occur in the human body. This approach has yielded successful drugs to treat diseases such as anemia, cancer and rheumatoid arthritis.
Biotech drugs are especially appealing because they face no competition from generics: No regulatory pathway yet exists in the U.S. for bringing to market generic biotech drugs. So until Congress creates such a pathway, no generic threat will exist to the $4,400 a month that Genentech Inc. charges for its cancer drug Avastin, or the $200,000 a year that Genzyme Corp. gets for Cerezyme to treat Gaucher disease. And biotechnology products tend to target specialized areas of medicine that don't require mass advertising or armies of salespeople.
So big pharmaceutical companies have spent nearly $76 billion since 2005 to buy biotech companies, according to Health Care M&A Information Service, a unit of Irving Levin Associates Inc., a Norwalk, Conn., research company. While in 2005 there were 33 deals amounting to $16.5 billion, in the first nine months of this year there were 49 deals totaling $28.7 billion, including AstraZeneca PLC's $15.6 billion acquisition of MedImmune, which followed a bidding war against Eli Lilly, among others.
Meanwhile, Novartis and Pfizer recently announced the formation of in-house biotech units.
The dearth of new products has led the industry to invest heavily in marketing and legal tactics that squeeze as much revenue as possible out of existing products. Companies have raised prices; the average price per pill has risen 63% since 2002, according to Michael Krensavage, Raymond James analyst. Companies raised advertising spending to $5.3 billion in 2006 from $2.5 billion in 2001 and since 1995 have nearly tripled the number of industry sales representatives to 100,000.
The industry spent $155 million on lobbying from January 2005 to June 2006, according to the Center for Public Integrity, on "a variety of issues ranging from protecting lucrative drug patents to keeping lower-priced Canadian drugs from being imported." The industry also successfully lobbied against allowing the federal government to negotiate Medicare drug prices, the center said. The lobbying has drawn fire from politicians, doctors and payers, and damaged the industry's public image.
Aware that seven of the top 10 drug launches of 2006 were generics, pharmaceutical giants are pushing more deeply into that business. In first nine months of this year, Novartis's generics unit, Sandoz, grew roughly three times as fast as its branded-drugs business and accounted for nearly 20% of overall revenue. "The balance is changing," says Novartis CEO Dr. Vasella. In the coming quarters, "we will continue to see a faster growth opportunity" in generics.
After Pfizer's antidepressant Zoloft went off-patent last year, the company's own generics unit, Greenstone, launched a generic version of the drug.
Johnson & Johnson has its own generics unit. Other companies cut deals with generics manufacturers, licensing them the right to sell "authorized generics" that are identical to a branded drug that has gone off-patent.
Diversification is another hope. Roche Holding AG is pursuing a $3 billion hostile takeover of Ventana Medical Systems Inc., a diagnostics company that makes the test used to determine whether women with breast cancer should receive Herceptin, a targeted biotechnology drug that Roche sells in some markets.
The bid is part of a broad push further into diagnostics by the company, which said in July that Severin Schwan, who runs the company's diagnostics unit, will take over next year as CEO.
Yet none of these moves are forestalling cost slashing. Pfizer is cutting 20% of its sales force, AstraZeneca is cutting 10% of its employees and Johnson & Johnson is shrinking its staff by 4%, according to Bernstein Research. As many as 50,000 industry positions will be displaced over the next 10 years, according to wealth-management company RegentAtlantic Capital, Chatham, N.J.
AstraZeneca, GlaxoSmithKline and Bristol-Myers Squibb have also recently suggested they will outsource at least some of their manufacturing. "There are lots of people in India, China and Eastern Europe who can make products of the same quality as ours but at significantly less cost," says Bristol-Myers Squibb CEO James Cornelius.
The outsourcing is expected to extend to research. "We don't do any basic research yet in the lower-cost countries, but over the next few years, to be successful you'll have a constant emphasis on looking for that," Mr. Cornelius says.
The coming difficulty is threatening every industry tradition. "I'm talking to you from the 44th floor of an office on Park Avenue," Mr. Cornelius says. "A year from now, I won't be talking to you from the 44th floor because we're going to move downstairs out of these very expensive offices."
--Sarah Rubenstein and Ron Winslow contributed to this article.
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See Sortable Chart for drugs going off patent.
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