Terms of Coverage for Elderly Top Priority for Drug Industry

With the ever-rising cost of prescription drugs generating an outcry to reform Medicare, PhRMA’s president finds himself in the eye of the storm.

As president of the Pharmaceutical Research and Manufacturers of America, Alan F. Holmer represents the country’s largest research-based pharmaceutical and biotechnology companies. The organization lobbies on behalf of its members in Washington and state capitals. PhRMA’s federal legislative priority this year is expansion of drug coverage for the elderly. Other recent battles have included Maine’s attempt to impose price controls on prescription drugs and efforts to allow exported prescription drugs to be brought back to the United States for sale.

Holmer, head of PhRMA since 1996, began his career working as a congressional staffer and as a tax lawyer. In 1981, President Reagan appointed him deputy assistant to the president for intergovernmental affairs, with responsibility for liaison with state and local officials. From there, he went on to positions in the Commerce Department and in the Office of the U.S. trade representative.

He established and became cochairman of international trade practice for the law firm Sidley & Austin in 1989.

Holmer has served as an adjunct professor at Georgetown University Law Center and as a guest lecturer at various law schools and universities. The coauthor or editor of three books, he graduated with honors from Princeton University in 1971 and Georgetown University Law Center in 1978. He spoke recently with Senior Contributing Editor Patrick Mullen.

MANAGED CARE: What issues are at the top of PhRMA’s agenda?

ALAN F. HOLMER: By far, the pharmaceutical industry’s top priority in 2001 is to achieve enactment of expanded prescription-drug coverage for Medicare beneficiaries. We’re committed to trying to achieve that, ideally during this calendar year but certainly in this congressional cycle.

MC: What do you think of the Medicare prescription-drug proposal that the Bush administration has put forward?

HOLMER: We’re pleased by the emphasis that President Bush has placed on this issue, and we’re taking a careful look at his proposal. As we look at specific proposals, we think that seniors should have the same kind of health care options that members of Congress have, including prescription-drug coverage. That kind of coverage would help senior citizens in two ways. First, they would have access to discounts on medicines that their health plans are able to negotiate with pharmacies and manufacturers. These pharmacy and manufacturer discounts combined average somewhere between 30 and 39 percent. Second, because of these discounts with many health plans, seniors would make copayments as opposed to paying the full retail price for the medicine.

MC: Do you have any concerns about how heavily President Bush’s Medicare drug benefit proposal leans on the states as the delivery mechanism? Are you concerned that it might not be administered evenly or that there might be some delays as states go about implementing the program?

HOLMER: The key aspect of this from our perspective is to make sure that the delivery mechanism is through the private sector. Two proposals seem to be getting the greatest attention in the Congress. One is the bill that passed the House last year introduced by Congressman Bill Thomas, now chairman of the Ways and Means Committee, and Speaker Dennis Hastert. The other is the Breaux-Frist bill that was introduced last year and has been reintroduced this year. While we have some issues with those proposals, we think that they get the basic architecture of the benefit correctly. We look forward to working with all members of Congress — Republicans and Democrats — and with the Bush administration to try to get this done at the earliest possible time. We’re also going to take care that we do it in a manner that’s consistent with our core principles, including looking at the issue from the perspective of patients. We want to make sure that patients are able to choose from a variety of competing health plans, so that they will be able to select overall health coverage and a prescription-drug benefit that best meets their individual needs.

MC: Beyond the prescription-drug-benefit proposal, what changes in the regulatory environment do you expect because of the change of administrations?

HOLMER: It’s a little early to tell. Obviously, we don’t yet have a new administrator of the Health Care Financing Administration. Nor has there been an announcement of the new head of the Food and Drug Administration. So I think it’s a little early to be able to comment on the regulatory climate in Washington. One example of what we might expect comes out of the president’s budget. We’re very pleased to see continued strong support for funding the National Institutes of Health. There’s an extremely positive and synergistic relationship between the NIH and the pharmaceutical companies, and we’re very pleased to see that continuing in the Bush administration. To the extent that issues of interest have been raised in the comments of some cabinet members during their confirmation hearings, I think there is recognition of the importance of making sure that policy proposals coming from the executive branch continue to nurture biomedical innovation.

MC: What are some examples?

HOLMER: First is strong support for basic biomedical research, which we see in the president’s budget with respect to the NIH. Second, there needs to be continued strong support for intellectual property protection. Ambassador Robert Zoellick, the new U.S. trade representative, made comments during a Senate Finance Committee hearing that I think show he recognizes the tremendous importance of strong intellectual property protection. Third, we have to make sure that there is a transparent and efficient regulatory environment through the Food and Drug Administration. That will depend to a significant degree on who the new FDA commissioner turns out to be. Certainly all of the conversations that we’ve had with officials in the Bush administration underscore their commitment to ensuring that we have an efficient and transparent regulatory environment at the FDA. Fourth, it is imperative that pharmaceutical companies be able to sell their products in a free market environment that recognizes the extraordinary risks these companies face in getting their products to market. I think there’s a strong commitment on the part of the Bush administration to market principles and market mechanisms and opposition to price controls, which would have a significantly negative impact on the pharmaceutical industry. A fifth key element is to make sure we have a global business environment that allows the American-based pharmaceutical industry to capitalize on its comparative advantages. That requires adhering to free trade principles and expanding free trade. We see strong support on the part of the Bush administration for continuing to nurture an environment that allows for a strong pharmaceutical and biotechnology industry.

MC: You mentioned free-market principles. That raises the issues of price controls. Recently a court in Maine threw out an attempt to impose price controls on drugs in that state. What was wrong with the attempt in Maine, and should there be any curbs at all on the market?

HOLMER: Private-sector mechanisms can work very effectively to control costs. Imposing price controls would discourage private investment in drug research and development and will lead to a reduction in revenues to the pharmaceutical companies. If you reduce revenues to the companies, inevitably that’s going to have a negative impact on their ability to continue their extraordinary record in research and development. I know an example from my own personal perspective. My 21-year-old son and 18-year-old daughter have cystic fibrosis, and my kids aren’t alone. Millions of Americans who have life-threatening diseases are waiting for better treatments and better cures. We’re tantalizingly close to coming up with a cure for cystic fibrosis. To the extent that price controls are imposed on the pharmaceutical industry, you’re going to make the choices even more difficult for the companies with respect to what diseases they have an opportunity to focus their research on and which projects they’re just not going to be able to fund. One reason the United States leads the world in pharmaceutical innovation by far is because we have a free-market environment. I think there’s strong recognition across the country that people don’t want to harm the wonderful records that companies have been able to achieve in bringing new medicines to market. Having said that, are there senior citizens who don’t have drug coverage and who need help with paying for their medicines? Absolutely. That’s why we are so committed to making sure that a prescription-drug proposal that will expand coverage for seniors is enacted into law at the earliest possible time, hopefully this year.

MC: Do you think a Medicare benefit will diffuse the political pressure that has arisen? Last fall, Senate candidates taking busloads of seniors across the border to Canada to buy less expensive prescription drugs became a regular part of several campaigns.

HOLMER: I think that pressure will be reduced. Senior citizens who go to Canada to buy their medicines usually don’t have prescription-drug coverage. Therefore, they’re paying full retail price for prescriptions. They don’t yet have the benefit of discounts that health plans negotiate on behalf of patients they represent. If you can get a private-sector-oriented prescription-drug plan enacted into law, that will provide those senior citizens with those discounts, plus the overall benefits that come with having insurance. Political pressure is so high on this issue because that insurance coverage does not presently exist for a significant portion of our senior citizens. About one-third of our senior citizens don’t presently have prescription-drug coverage.

MC: What would you say to those who are critical of the drug industry spending research money on what are considered lifestyle drugs, such as Rogaine or Viagra?

HOLMER: Most current so-called “lifestyle drugs” were discovered while testing a medicine for a life-threatening disease. For example, a medicine that stimulates hair growth in men was discovered during the testing of a drug that was intended to treat prostate disease. The vast bulk of research dollars spent by pharmaceutical companies are directed toward life-threatening conditions.

MC: How well do you think the public understands that, especially given the enormous amounts being spent on direct-to-consumer advertising of lifestyle drugs? Does that skew perception of the pharmaceutical industry’s priorities?

HOLMER: It’s a good question. As far as direct-to-consumer advertising, people often don’t realize this, but we have an enormous problem in this country with respect to undertreatment and underdiagnosis of disease. The American Diabetes Association will tell you that there are 6 million Americans who are unaware of the fact that they have diabetes. Yet about 15 percent of all health care costs in this country are related to diabetes. One-third of people who suffer from severe depression in this country never even seek treatment for it. Millions of Americans have high blood pressure but don’t seek treatment for it. The more information we can get out there, so that patients can become more informed and have more informed conversations with their doctors, the better off those patients and our health care system will be. I was with the head of a major patient organization earlier this week. She had exactly the same attitude: That as more patients become personally involved in their own health care, the fact that pharmaceutical companies are providing more information about new cures and treatments benefits patients and the health care system.

MC: As people become more involved in their own health care, do you see consumer demand changing the focus of some pharmaceutical research?

HOLMER: I don’t know the answer to that. Individual companies are going to make their own decisions as to how they’re going to spend their research dollars. I’d leave that to them.

MC: How is the Internet changing the marketing of drugs, the information people have about prescription drugs, and the expectations they have when they walk into a doctor’s office?

HOLMER: A Harris poll found that 70 million Americans went online to search for information about health in the last year. So the Internet is obviously an important and powerful communications tool. But despite the growth and use of the Internet with respect to pharmaceutical prescriptions, the doctor still holds the prescribing pen. If patients are going to be able to purchase medicines on the Internet, it should be with the doctor’s diagnosis and a legal and valid prescription.

MC: Aren’t more patients walking into doctors’ offices armed with information they’ve downloaded about a new drug, wondering why they’re not getting it?

HOLMER: I’m sure that occurs. Again, the more information patients have and the more informed conversations they can have with their doctors about new treatments, including medicines, the better off they’ll be and the better care they’ll receive. This is the Information Age. As consumers gain access to more information, their ability to have informed conversations with their doctors and make intelligent decisions will be enhanced. That’s an extremely good thing.

MC: With the recent mapping of the human genome, the pharmaceutical industry appears to be on the verge of revolutionary change. How is that playing out so far, and where do you see it going?

HOLMER: Our survey last year found 369 biotechnology medicines in development, up from 83 in 1988. About half are in development for cancer, 39 for infectious diseases including hepatitis C and malaria, 28 for neurological disorders like multiple sclerosis, Parkinson’s, and Alzheimer’s, and 26 for heart disease like coronary artery and congestive heart failure. Genetic research affects all drug development, not just our companies’ cutting-edge biotechnology research. The research helps us to understand how the body works and what goes wrong in specific diseases. I’ve seen this on a personal level with respect to cystic fibrosis research and gene therapy, a new field involving replacing genes that are malfunctioning in some way. I recently saw a fascinating piece in the Washington Post about cystic fibrosis research at the University of Pennsylvania. The challenge for cystic fibrosis research is that they know what the defective gene is and how to fix it, but they haven’t found a mechanism to deliver the corrected gene into the body in a way that won’t be rejected. Researchers at the University of Pennsylvania are taking all the bad stuff out of the AIDS virus and the Ebola virus and using them, which are effective at latching onto the human body, to deliver the new cystic fibrosis gene. I don’t know what kind of promise that holds, but it shows the kind of breathtaking developments that are occurring with respect to gene therapy and other aspects of genetic research.

MC: Are we talking about companies conducting the same kind of research as in the past, using new tools, or are we looking at the emergence of a new industry?

HOLMER: I don’t think it’s a new industry, but it is providing a substantial expansion of the targets of opportunity that researchers will be able to use.

MC: Over the years, physicians and members of managed care plans have found it difficult to prescribe the drug they want because it’s not on the plan’s formulary. Is this the right way to run a drug-delivery system within a managed care setting, or are there other ways of doing it that make more sense?

HOLMER: There are a variety of private-sector mechanisms that can be used to help contain the overall costs of prescriptions. Some may involve use of formularies. Our view is that if formularies are used, decisions regarding inclusion or exclusion of a drug from a formulary should be based on sound clinical information that is reviewed by trained health care professionals. We believe any decision to include or exclude a particular medication should consider the value for the patient, insurer, and employer in terms of positive health outcomes — with particular emphasis on quality-of-life improvements. It’s imperative that prescribers and patients be well informed about how decisions are made with regard to the formulary and how to obtain a nonformulary product.

MC: Why does PhRMA oppose reimportation of prescription drugs, which some argue could bring down drug costs in this country?

HOLMER: Reimportation of medicines is a terrible idea. Going back to 1969, every FDA commissioner — Republican and Democrat — has raised concerns about reimportation. The key issue here is control of a product’s chain of custody. Any reimportation plan enacted into law would significantly increase risk of harm to patients, risk that they’d be getting counterfeit products without realizing any real savings. It’s important to remember that in 1988, after lengthy hearings and consideration, particularly by the House Energy and Commerce Committee, Congress overwhelmingly passed a landmark consumer-protection law that prohibited reimportation of medicines that were outside the manufacturer’s control. We believe that Congress made the right decision in 1988, and it does not make sense to change that. When the House considered this bill on the floor last year, John Dingell said, “Make no mistake, this reckless legislation never went through the committees with expertise or experience in these matters. It is going to lead to needless injuries and deaths.” We thought that then-Health and Human Services Secretary Donna Shalala made the right decision in December 2000, when she announced that she could not implement the law because she could not certify that patients would be safe or there would be significant savings to consumers. It’s possible that current HHS Secretary Tommy Thompson is going to review that decision, and that’s fine by us. We believe that if he carefully reviews whether this reimportation provision can be implemented safely, if he talks to the U.S. Customs Service, the FDA, the Drug Enforcement Administration, and the FBI, he will reach what we believe is an inescapable conclusion: You cannot allow reimportation of these products from overseas without putting our nation’s medicine supply at risk.

MC: Thank you.