Financial Chronicle - - FRONT PAGE - CYN­THIA KOONS & BEN BRODY

Pharma gi­ants are se­cretly lob­by­ing to roll back re­cently man­dated medicine dis­counts for US se­niors. They plan to use a Con­gress ses­sion to peel back a leg­isla­tive loss they suf­fered ear­lier.

PHARMA gi­ants have been quick to tout their ef­forts to help the Trump ad­min­is­tra­tion rein in run­away drug prices, but be­hind the scenes the in­dus­try has been lob­by­ing fu­ri­ously to roll back re­cently man­dated medicine dis­counts for US se­niors.

Drug com­pa­nies are fo­cus­ing lob­by­ing ef­forts to use a pos­si­ble lame-duck ses­sion of Con­gress to peel back a leg­isla­tive loss they suf­fered ear­lier this year, ac­cord­ing to peo­ple fa­mil­iar with the ef­forts. On the line for the drug in­dus­try is $1.9 bil­lion next year, ac­cord­ing to one es­ti­mate. Crit­ics say the ef­fort by the in­dus­try has the po­ten­tial to in­crease costs for some of the most vul­ner­a­ble and med­i­cally frag­ile Amer­i­cans: se­niors on Medi­care.

Medi­care cov­ers most drug costs un­til a pa­tient and their plan spend $3,750. Then, cov­er­age drops off and doesn’t pick up again un­til a pa­tient’s to­tal out-of-pocket costs, in­clud­ing what drug com­pa­nies pay in dis­counts, hit $5,000. That gap be­tween cov­er­age is the donut hole.

Al­most 30 per cent of se­niors fell into the hole in 2014, ac­cord­ing to data from the Medi­care Pay­ment Ad­vi­sory Com­mis­sion, and more are be­ing af­fected as costs rise for drugs to treat con­di­tions like di­a­betes, arthri­tis and can­cer.

To make the donut hole less oner­ous, drug­mak­ers had been re­quired to give a 50 per cent dis­count on their prod­ucts once se­niors hit the spend­ing thresh­old. A leg­isla­tive change in Feb­ru­ary backed by both par­ties in­creased the in­dus­try dis­count to 70 per cent.

That ex­tra dis­count is what drug­mak­ers want to roll back, claim­ing that it goes too far and that the drug in­dus­try is tak­ing too much of the ex­pense. The lame duck ses­sion — in be­tween the midterm elec­tions on Tues­day when Democrats are pro­jected by many to take the House, but be­fore they would ac­tu­ally be seated and take over in Jan­uary —may be pharma’s best, last chance un­less Repub­li­cans hold on.

Drug­mak­ers are up against Democrats, who op­pose rolling back the larger dis­counts, but may also strug­gle with the Trump ad­min­is­tra­tion, which has made low­er­ing drug costs for con­sumers a pol­icy pri­or­ity.

In re­sponse, the in­dus­try has in­creased its mus­cle in Wash­ing­ton.

Gi­ants like John­son & John­son, Am­gen Inc, As­traZeneca Plc and Eli Lilly & Co boosted spend­ing on lob­by­ing by 30 per cent or more in the third quar­ter, ac­cord­ing to an anal­y­sis.

“We sup­port re­duc­ing the man­u­fac­turer cov­er­age gap re­bate per­cent­age,” Ruud Dob­ber, pres­i­dent of As­traZeneca US, said in a state­ment.

John­son & John­son spent $1.98 mil­lion dur­ing that pe­riod, more than twice its ex­pen­di­ture dur­ing the same pe­riod a year ear­lier, ac­cord­ing to lob­by­ing dis­clo­sures filed with Con­gress. The com­pany said the in­crease was to pay dues to trade as­so­ci­a­tions. Its dis­clo­sure forms listed “is­sues re­lated to Medi­care Part D,” as the pre­scrip­tion drug pro­gram is known, as a key pol­icy it sought to in­flu­ence.

The drug in­dus­try has said it sup­ports se­niors pay­ing less for drugs, just not at com­pa­nies’ ex­pense. “Clos­ing the donut hole is a good thing,” phar­ma­ceu­ti­cal re­search and man­u­fac­tur­ers of Amer­ica (PhRMA), spokes­woman Juliet John­son said. But the way it was done ear­lier this year was wrong for se­niors.

“This was a rushed and ill-con­sid­ered change,” the biotech­nol­ogy in­dus­try or­gan­i­sa­tion, which rep­re­sents biotech­nol­ogy com­pa­nies, said in a state­ment. “We will con­tinue to make the case to law­mak­ers in both par­ties for a fix.”

PhRMA wants in­sur­ers, whose share of drug costs was re­duced in the new law, to foot more of the bill. Crit­ics of the drug in­dus­try say that’s mis­guided.

“If you shift it back onto the plans, I’m only go­ing to pay more in out-of-pocket or in pre­mi­ums,” said David Mitchell, who runs the drug price ad­vo­cacy group Pa­tients for Af­ford­able Drugs NOW. “Why would we re­visit this? Why would we even be talk­ing about this? Ex­cept that big pharma is un­ac­cus­tomed to hav­ing things hap­pen to it by con­gres­sional ac­tion that they do not like.”

The Feb­ru­ary in­crease to the donut hole dis­counts should put $1.3 bil­lion back in se­niors’ pock­ets in 2019, and $600 mil­lion more in gov­ern­ment cof­fers, ac­cord­ing to Seat­tle­based re­search and con­sult­ing firm Mil­li­man.

Pharma com­pa­nies have pushed law­mak­ers to rein the dis­count back to 63 per cent in­stead. The in­dus­try ear­lier this year tried to push for that change dur­ing ne­go­ti­a­tions about an opi­oid cri­sis re­lief pack­age, prompt­ing some crit­ics to say they were seek­ing a bailout at a time when they were sup­posed to be ad­dress­ing other prob­lems.

Part of the ar­gu­ment over the dis­counts stems from a de­bate about the Feb­ru­ary law. Af­ter the law went into ef­fect, the con­gres­sional bud­get of­fice found that it re­duced spend­ing by more than orig­i­nally thought. Repub­li­cans have said they want to scale back that im­pact with a smaller dis­count, while Democrats have said do­ing so might un­fairly harm se­niors.

“Repub­li­cans are just des­per­ate to get their multi­bil­lion-dol­lar give­away to Big Pharma done be­fore a Demo­cratic ma­jor­ity takes over the House,” said Henry Con­nelly, a spokesman for Nancy Pelosi, the demo­cratic leader in the House of Rep­re­sen­ta­tives.

Rep­re­sen­ta­tive Greg Walden, the Repub­li­can who leads the House En­ergy and Com­merce com­mit­tee, sup­ports chang­ing the donut hole, though said the way it was done in Feb­ru­ary needs to be fixed.

“He hopes and ex­pects there will be bi­par­ti­san sup­port when mem­bers re­turn to DC,” said Zach Hunter, Walden’s spokesman. The com­mit­tee would be a start­ing place for leg­isla­tive changes to the cur­rent law.

Drug­mak­ers are up against Democrats, who op­pose rolling back the dis­counts, but may also strug­gle with the Trump ad­min­is­tra­tion, which likes to lower drug costs

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