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Will the Senate Really Push Back Against the Drug Industry?

I agree that Byron Dorgan’s reimportation amendment is quite a roundabout way of lowering the exorbitant prices that Americans pay for prescription drugs: rather than have our own government push Big Pharma to bargain prices and give us a better deal, we would be able to piggyback off the success of other countries in doing so. But there are other ways in which legislators are trying to ensure that drugs are more affordable and readily accessible to consumers, more directly trying to combat the extraordinary protections that the industry receives in the U.S.

Sherrod Brown, for one, has introduced two amendments to the Senate bill that aim to provide more affordable biologics--drugs made from living organisms that many researchers have hailed as the next frontier for prescription drugs. Biologics typically cost some 20 times more than traditional chemical drugs; the breast cancer biologic Herceptin costs about $48,000 a year. Brown is trying to push back against the 12-year data exclusivity window for biologics in the Senate bill, a form of monopoly protection from cheaper generic competitors that's also in the House bill. BIO, the industry's lobbying arm, argues that it needs such a long window to recoup its high R&D costs and develop new drugs. But the Federal Trade Commission itself has determined that such a time frame is unnecessarily long, benefitting the industry at the expense of consumers.

Both of Brown's amendments try to address the fundamental reasons why drug prices are so much higher in the U.S. than in the rest of the world--the monopolistic protections they enjoy and the reluctance of the government to negotiate directly with the industry on prices. The first would insert a provision that would shorten the 12-year monopoly period if a company ends up making $3.5 billion in profits from a biologic drug. Where did the profit ceiling come from? On average, it costs about $1.2 billion to develop a biologic, according to the drug industry. According to sources familiar with the provision, Brown tripled that amount to account for marketing costs and adequate incentives. Brown's second amendment would give a 75% discount on biologics to seniors in the Medicare Part D donut hole, who currently receive a 50% discount on conventional drugs.

Brown's earlier attempt to push back against BIO failed in the Senate HELP committee mark-up, facing intense opposition from Democrats from states with heavy industry ties. (Ted Kennedy, in fact, had originally insisted that the 12-year window be put in the billl.) Coming into the Senate floor debate, BIO had all but declared victory, having succesfully warded off Henry Waxman's opposition to an amendment inserting the 12-year protection in the House bill. But over the last few weeks, the political climate has shifted as more legislators begun to question the deal that the White House struck with Pharma behind closed doors this year. With the news that the drug industry inflated prices this year--and with the pressing need to find more money to finance reform--the Senate could prove more willing to squeeze more money from the industry.

Of course, it's precisely because Brown's amendments directly address the dysfunction that's at the heart of the American drug industry that they're far less likely to pass. While conservatives like McCain are willing to support what it takes to get cheaper drugs by proxy, as in Dorgan's amendment, they remain reluctant to change the way the market actually works in this country to the industry's great advantage. Both amendments will certainly elicit protests that they will cripple a nascent industry's ability to develop new drugs in the future, and it's worth thinking about the market conditions that are actually necessary to foster innovation. But at the least, Brown's provisions will force legislators to confront the big questions head on: how much protection are we willing to give the American drug industry, and what price will consumers have to pay as a result?