Healthcare Business News
Rep Bill Cassidy R Louisiana

GOP lawmakers offer bill to ease drug shortages

By Jaimy Lee
Posted: November 30, 2012 - 4:00 pm ET

Republican lawmakers introduced legislation that would aim to resolve drug shortages by changing the way that generic sterile injectable drugs are reimbursed and offering brand-name drug manufacturers incentives to enter the market when drugs are in short supply.

Reps. Bill Cassidy (R-La.), Andy Harris (R-Md.), Mike Rogers (R-Mich.), Tom Rooney (R-Fla.) and Dan Benishek (R-Mich.) introduced the Patient Access to Drugs in Shortage Act on Thursday in the House of Representatives.

The bill would mandate that generic injectable drugs made by three or fewer manufacturers be reimbursed based on wholesale acquisition cost.

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Currently, these products have been reimbursed based on average sales price, plus a 6% markup, since the enactment of the Medicare Modernization Act of 2003. Oncologists use the 6% markup to cover practice costs; however, reforming the way that oncology drugs are reimbursed has been cited by oncologists and pharmacists as one way to address drug shortages.

Generally, the average sales price is about 50% of the average wholesale price for the same drug, according to HHS' inspector general's office.

In addition to changing the way that generic injectables are reimbursed, the proposed legislation would exempt generic injectable drugs made by three or fewer manufacturers from Medicaid rebates and the federal 340B drug discount program.

It also would exclude brand-name drug manufacturers from paying an annual fee mandated by the healthcare reform law if the company begins manufacturing a drug in short supply. The manufacturer would be exempt from paying the annual fee until the drug was no longer listed on the Food and Drug Administration's drug shortages list.

The majority of drugs in short supply are generic injectables, such as oncology drugs. The total number of active drug shortages has increased over the last year although the number of newly reported drug shortages has decreased.

“This legislation adjusts how Medicare pays for medicine so as to decrease the risk of a drug shortage,” said Cassidy, a physician, in a news release. “It is good for everyone.”

In the same news release, Rooney said the legislation will help prevent shortages, noting that the previous legislation he sponsored with Rep. Diana DeGette (D-Colo.) aims to give the FDA, physicians and physicians the tools “to identify, respond to and prepare for drug shortages.”

The Community Oncology Alliance said in a letter to Cassidy that it supports the legislation.

“The underlying root cause of the shortages is economic; in particular, unstable Medicare pricing for generic, sterile injectable drugs. Until pricing is stabilized, we believe that drug shortages will persist,” wrote Dr. David Eagle, president of the Community Oncology Alliance (PDF), in a Nov. 29 letter.

Other groups oppose the legislation. The Safety Net Hospitals for Pharmaceutical Access, a trade group that represents providers that participate in the 340B program, said the exemption included in the bill would include drugs that aren't in short supply.

“Numerous explanations for drug shortages have been offered, including manufacturing challenges, regulatory hurdles and low reimbursement,” the SNHPA said in a news release (PDF). “But no evidence has suggested that the 340B drug discount program contributes to drug shortages.”

There were 282 drug shortages in the third quarter of this year, compared with 256 in the third quarter of 2011, according to the University of Utah Drug Information Service. New shortages fell from 267 in 2011 to 158, as of the third quarter of this year.

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