Life Science Compliance Update

September 05, 2012

FTC Approves Accelerated Recovery Initiative to Reduce Drug Shortages

Empty Pharmacy Shelves
The Federal Trade Commission (FTC) issued a formal Advisory Opinion to the Generic Pharmaceutical Association (GPhA) approving the trade group’s proposed “Accelerated Recovery Initiative,” which hopes to address drug shortage issues.  The GPhA requested an opinion on July 16, 2012.   

GPhA plans to adopt this program, known as ARI, to help the Food and Drug Administration (FDA) to respond to the unprecedented increase in shortages of critically important medicines that has occurred in recent years, as we have reported several times.  The ARI will attempt to resolve the shortages by providing FDA with information that GPhA believes will enable FDA staff to “more efficiently and effectively to accelerate the recovery of critical drugs in shorts supply” and thereby to help ensure patients have access to the drugs they need.  A key element of the ARI is an agreement among competitors to compile competitively sensitive production information from manufacturers of shortage drugs. 

The FTC said the proposal appears “not likely to harm competition.”  Although the manufacturer data that GPhA proposes to collect is competitively sensitive and the ARI would raise substantial antitrust concerns if this information were shared with competitors, “the proposed program includes many safeguards designed to insure that such sharing does not occur.”  GPhA has chosen an independent third party to collect and transmit the data to the FDA and that no other party, including GPhA, will have access to this information or any analysis derived therefrom. The program also includes various other features intended to minimize the risk that the ARI could serve to facilitate collusion among drug manufacturers. Accordingly, FTC said it “has no present intention to bring an enforcement action to challenge GPhA's proposed ARI program if it is implemented as described and the safeguards it contains are adhered to in practice.” 

The FDA has undertaken a variety of activities to address the drug shortage problem. In the case of generic injectables, this often involves asking other manufacturers of the drug in shortage if they are willing and able to increase their production. Other FDA strategies include expediting regulatory reviews to accelerate approval of new sources of supply, new manufacturing lines, or new raw material sources. The FDA also exercises regulatory discretion, for example permitting controlled importation of equivalent products approved abroad but not in the United States.  In May 2012, the FDA reported that industry response to its October 2011 request to manufacturers for voluntary early notification of potential supply disruptions had enabled it to prevent 128 potential drug shortages over the six month period from November 2011 through April 2012. 

The Proposed Program 

The ARI is intended to assist the FDA in responding to drug shortages by providing the agency with information from manufacturers relating to their production and supply of designated shortage drugs.  GPhA plans to engage IMS Health Incorporated to collect information from manufacturers of shortage drugs about their current and projected production and supply schedules.  IMS will use this data, along with market data it currently collects, to analyze whether, and to what extent, the anticipated supply of a given drug is likely to fall short of the projected demand over the next several months and then provide this information to FDA staff. The current focus of the program is on accelerating the recovery of critical drugs that are in short supply, but it is possible that the ARI program could also be used to assist the FDA to head off potential drug shortages. 

The program will operate “under terms of strict confidentiality and with appropriate safeguards.”  In particular, IMS will report the production information it collects and the analysis it performs only to the FDA and will not share it with any other party.  FTC understood the details of the program to be as follows: 

1. Scope of the Program: The FDA, with input from GPhA, will decide on the initial group of drugs to be addressed through the ARI program.  GPhA anticipates that the initial focus of the program will be on a subset of drugs currently on the FDA's published list of drugs in shortage.  Other criteria for inclusion in the ARI are expected to include at least the following:  

a)    the drug is expected to be in shortage for more than 90 days;

b)    there is no therapeutic alternative (as defined by the American Society of Health-System Pharmacists' list); and

c)    it is multi-source (that is, there are other manufacturers that might be able to increase their production). 

The FDA would have discretion to include in the ARI program a drug that does not meet all of these criteria-for example, a drug that is not currently on the FDA drug shortage list but has the potential to go into shortage-where circumstances warrant.  Drugs may move into and out of the ARI program as requested by the FDA and depending on the circumstances.  Given the benefits of preventing potential drug shortages from becoming actual shortages, as the ARI program evolves there may be a focus on drugs that are not currently in shortage but present a potential for a shortage to develop. 

2. Manufacturer Participation: IMS, with assistance from GPhA, will recruit drug manufacturers to participate in the program.  All manufacturers of drugs covered by the ARI will be invited to participate, regardless of whether they are members of GPhA and regardless of whether they are manufacturers of branded or generic drugs.  When a drug is added to the ARI program, manufacturers of that drug that are not already ARI participants will be invited to join the program.  GPhA will not participate in recruitment of firms selling potential, rather than actual, shortage drugs.  Participation in the ARI is voluntary and the program will be “non-exclusive,” that is, participating firms will be free to participate in a similar program by some other sponsor (were one to be organized). In addition, nothing in the program would limit the ability of a firm to provide information directly to the FDA or to otherwise disclose its own ARI data for other legitimate purposes consistent with the antitrust guidelines. 

Companies that choose to join must execute a participation agreement that requires them to pay annual ARI dues and to comply with specified confidentiality rules, antitrust guidelines, and prohibitions on misuse of the ARI process.  The draft participation agreement includes various commitments to be made by individual companies, GPhA, and IMS to ensure that the data participants submit is kept confidential and not shared or used in ways not contemplated by the program. 

3. IMS Activities:  IMS will gather information from manufacturers of selected shortage drugs, perform a “gap analysis” for each drug included in the ARI program, and submit reports to the FDA.  IMS will not use the information generated under the ARI for any other purpose. IMS will contact manufacturers of ARI drugs that have signed a participation agreement and request current supply and production information and forecasts for the next 90-180 days for the drug or drugs in question.  IMS will ask manufacturers to update this information on a monthly basis and to notify both IMS and the FDA immediately of unanticipated changes or potential supply disruptions.  Requests for information from manufacturers about potential shortage drugs in the ARI program will be limited to those manufacturers that make or have made the drug in question.  IMS will use the production and supply data it collects, along with its own forecasts of demand based on past demand data, to perform the gap analysis, that is, the projection of the extent of a likely supply shortfall.  

IMS will produce a monthly report to the FDA providing both a summary analysis for each drug along with a detailed breakdown by National Drug Code number.  IMS will provide the gap analysis and underlying data that IMS generates under the ARI program only to the FDA and will clearly mark each report as confidential. IMS will not provide information contained in these reports, or any data gathered from participants, to GPhA, ARI participants, or any other party.  In addition, IMS will institute appropriate safeguards (e.g., firewalls) to limit internal access to this information to guard against the risk that knowledge of this confidential information could spill over into other aspects of IMS’s business and be used for non-ARI purposes.  

IMS communications with individual manufacturers under the ARI program will be limited to that which is necessary to gather the data needed to perform the gap analysis for an ARI drug.  “IMS will only be receiving supply/forecast data for the drugs at issue and will not be having an ongoing dialogue with the manufacturers, nor will it be requesting any additional information from these manufacturers.”  All communications with manufacturers concerning their ability to increase their production or supply of a drug will continue to be undertaken by the FDA.  IMS will not make recommendations to the FDA regarding how the agency should seek to address a given drug shortage. Instead, GPhA expects that the FDA will use the factual information IMS provides along with non-public information possessed by the agency to determine appropriate solutions to a shortage.  

IMS will not disclose competitively sensitive information to GPhA. IMS will submit monthly reports to GPhA, and GPhA expects it may share those reports with its members and the public at large.  These IMS reports to GPhA will identify

  • The number of drugs addressed in the most recent FDA report,
  • The number of reports IMS sent to the FDA, and
  • The number of drugs added or deleted from the ARI program during the prior month.  

The report may identify by name the specific drugs addressed in the most recent IMS report to the FDA, to the extent that the drug already appears on the FDA's drug shortage list.  In no event, however, will IMS disclose to GPhA information that would identify any potential shortage drug that the FDA has requested IMS to analyze, unless the FDA has already publicly disclosed that information. In addition, IMS will not disclose information that would reveal the production and supply infonnation submitted by manufacturers. 

Legal Analysis 

The key antitrust issue raised by the ARI arises from the fact that it involves an agreement among competitors to pool information about their output, both present and future.  As a general matter, the antitrust laws do not prohibit trade associations from collecting data from competing sellers and collectively providing information and analysis to government officials.  Such activity, undertaken for a legitimate purpose, may serve to promote rather than injure competition and consumer welfare. 

Under some circumstances, however, such data gathering programs can serve to facilitate collusion among competing sellers and thereby present a substantial risk of anti competitive harm. Trade association programs that involve sharing of competitively significant information among competitors have long been a subject of antitrust scrutiny, given their potential to facilitate collusion among rivals.  Such programs are not per se unlawful unless part of a larger scheme to fix prices or other competitively significant terms of dealing. Instead, they are judged under the rule of reason, based on their likely effects on competition in light of the particular circumstances. 

FTC said that “certain circumstances [in the proposed ARI raise the potential for competitive harm.  As GPhA recognizes, the inventory and future production information it proposes to collect is competitively sensitive.  In addition, markets for the sale of generic injectables, which represent the vast majority of drugs in shortage, typically have few sellers.  Such market concentration tends to make markets more susceptible to collusion. 

On its face, however, FTC asserted that “the proposed ARI program does not involve the exchange or sharing among competitors of the output information that the program would collect.  Rather, the information would be collected and analyzed by a third party, IMS, which would share this information solely with the FDA.”  Moreover, the program will operate “under terms of strict confidentiality and with appropriate safeguards.”  GPhA has designed various aspects of the program to limit the potential that the ARI might result in harm to competition. 

First, the role of GPhA itself is strictly limited to shield it from access to competitively sensitive information.  GPhA is involved in developing the initial identification of drugs to be part of the ARI, will assist IMS in recruiting participants, and will provide financial support for the program.  Aside from publicizing the program, no other activities by GPhA are specified.  GPhA will receive monthly reports from IMS, which it may disseminate to its members and others, but these will provide no information relating to the production data that IMS has collected, nor will they identify potential shortage drugs that IMS has analyzed. 

Second, GPhA has defined the obligations and activities of IMS to limit the risk that IMS would inadvertently facilitate anticompetitive behavior.  IMS's duty to strictly limit disclosure of the production data gathered from ARI participants, and any information and analysis derived therefrom, solely to FDA staff is a binding commitment set forth in formal written agreements.  Likewise, the agreements make clear that IMS's use of the information is strictly limited to ARI program activities. IMS also plans to institute appropriate internal safeguards to prevent misuse or improper disclosure of information generated under the ART. 

In addition, GPhA has defined IMS's role to be providing objective data and gap analysis reports to the FDA, not recommendations on how to address a given shortage. The ARI does not provide a role for IMS to act as a representative of ARI participant companies in matters involving drug shortages.  Nor does the ARI set up IMS as an intermediary between ARI participants and the FDA to broker solutions to a drug shortage or potential shortage. “This carefully defined role for IMS helps to guard against the risk that the ARI could have the unintended effect of fostering collusion among competing sellers acting through IMS,” FTC opined. 

Third, GPhA has taken steps to discourage ARI participants from attempting to use the program for anticompetitive ends. The draft ARI participation agreement: 

  1. Emphasizes the confidential nature of the production information to be collected;
  2. Advises companies of the need to ensure that their employees, agents, and consultants adhere to ARI program rules, which include confidentiality obligations embodied in the agreement and a set of antitrust guidelines that are provided along with the participation agreement; and
  3. Provides that participants that breach those obligations will be terminated from the program.  

Moreover, participants must make an express commitment not to use the ARI program activities to “exchange, discuss or agree on the price, output, cost, or other terms of competition, regarding any Shortage Drug or any other product or service.”   In addition, under the agreement, participants must indemnify GPhA, IMS, and other ARI participants for any losses resulting from breach of this commitment. Jd. § 8. 

FTC recognized that the safeguards GPhA has included “help to assure that the ARI is likely to operate in accordance with its legitimate purpose and limit the risk that the program would serve to facilitate collusion among actual or potential rivals.” 

“The ARI's protections against disclosure of confidential information may also offer other benefits,” FTC noted.  For example, assurance to manufacturers that their confidential information will be protected may encourage greater participation in the program and thereby result in more useful information to support the FDA's efforts to combat drug shortages.  

In addition, safeguarding non-public information relating to the supply of critical drugs, particularly as to the potential for a shortage, may help to reduce the risk of actions that distort the supply chain, whether abusive conduct by other market participants that may seek to exploit a shortage for their own advantage, or the potential for hoarding by well-intentioned health care providers concerned about their patients. 

Finally, it does not appear that the ARI program presents other risks to competition and consumers.  As noted above, the program is “non-exclusive,” that is, it involves no agreement among competitors to deal only through the ARI. It would not preclude ARI participants from also participating in another organization's program that sought to use similar data for legitimate purposes.  Nor would it have any effect on manufacturers' ability to use their own participant data in other business contexts. 

FTC did not assess the likelihood or extent of any precompetitive benefits that may result from the ARI because the anticompetitive effects appear unlikely.  FTC also noted that it understands that GPhA is continuing to discuss with FDA staff how best to make the ARI complement the FDA's existing drug shortage activities. 


May 24, 2012

White House: National Bioeeconomy Blueprint – Encouraging Collaboration


“Economic activity that is fueled by research and innovation in the biological sciences, the “bioeconomy,” is a large and rapidly growing segment of the world economy that provides substantial public benefit.”  As noted in President Obama’s recently published National Bioeconomy Blueprint, “The U.S.bioeconomy is all around us: new drugs and diagnostics for improved human health, higher-yielding food crops, emerging biofuels to reduce dependency on oil, and biobased chemical intermediates, to name just a few.” 

The public benefit gained through bio­logical research can be seen through the eyes of a patient who receives a critical medication that did not exist a decade ago.  The bioeconomy allows Americans to live longer, healthier lives, reduce our dependence on oil, address key environmental challenges, transform manu­facturing processes, and increase the productivity and scope of the agricultural sector while growing new jobs and industries. 

The National Bioeconomy Blueprint describes a number of key elements that will contribute to achiev­ing the potential of the U.S.bioeconomy.  Input from government, industry, and the public has helped to define them. They are: 

  • a full spectrum of basic and applied R&D activities performed by academic, government, and private sectors
  • public-private partnerships
  • a supportive commercialization system for bioinventions
  • innovative regulatory policies that reflect government awareness of needs for and impediments to progress
  • a skilled and creative workforce
  • public support for technological advances
  • flexibility to accommodate the evolving needs, discoveries, and challenges 

The Blueprint has two purposes: to lay out strategic objectives that address the key elements to help realize the full potential of the U.S.bioeconomy, and to highlight early achievements toward those objectives.  The Blueprint makes several important recommendations that federal agencies, academia and industry should pay close attention to: 

  1. Integrating entrepreneurship and industry involvement into the university research experience will facilitate the path from research to commercialization and help innovative ideas reach the marketplace. 
  2. Encouraging federal agencies to pursue “opportunities for effective public-private partner­ships in health to leverage Federal investments and industry investments and expertise.”
  3. The need for federal agencies to focus on building new, and augmenting existing, stakeholder collaborations to inform efforts, stream­line processes, and reduce costs and response times, while preserving safety and ensuring substantive benefit to public health.  We recently have seen actions such as this when the Centers for Medicare and Medicaid Services (CMS) decided to postpone data collection under the Physician Payment Sunshine Act and created a collaborative industry/stakeholder workgroup to address the challenges of implementing this section of the Affordable Care Act.  


Decades of life-sciences research and the development of increasingly powerful tools for obtaining and using biological data have brought us closer personalized medical treatments based on a patient’s own genomic information.  Increasingly, scientists and engineers are looking to augment biological research with approaches from other scientific disciplines for solutions to our most demanding scientific and societal challenges and seeing exciting options that will profoundly affect our future. 

The growth of today’s U.S.bioeconomy is due in large part to the development of three foundational technologies: genetic engineering, DNA sequencing, and automated high-throughput manipulations of biomolecules.  While the potential of these technologies is far from exhausted, a number of impor­tant new technologies and innovative combinations of new and existing technologies are emerging.  Tomorrow’s bioeconomy relies on the expansion of emerging technologies such as synthetic biology (the direct engineering of microbes and plants), proteomics (the large-scale study and manipulation of proteins in an organism), and bioinformatics (computational tools for expanding the use of biological and related data), as well as new technologies as yet unimagined.  There is also a set of emerging trends in recent research that foreshadow major advances in the areas of health, biological-based energy production, agriculture, biomanufacturing, and environmental clean-up. 

In recognition of the potential of the U.S. bioeconomy, in 2010 the Obama Administration included, in its science and technology priorities to inform Federal agency budget submissions, a priority for Federal agen­cies to “support research to establish the foundations for a 21st century bioeconomy.”  Agencies began focusing their efforts accordingly, and have made significant early progress in building a foundation for the future bioeconomy.  In addition, strategic objectives that would help to enable a future vibrant U.S. bioeconomy with potential to deliver major economic and social benefits began to emerge. 

On September 16, 2011, President Obama announced that his Administration would release a National Bioeconomy Blueprint as part of his commitment to supporting scientific discovery and technological breakthroughs to ensure sustainable economic growth, improve the health of the population, and move toward a clean energy future. 

Five Objectives of The National Bioeconomy Blueprint 

The National Bioeconomy Blueprint describes five strategic objectives for a bioeconomy with the potential to generate economic growth and address societal needs.  Although progress is being made in all of these areas, much work remains if the United States is to remain competitive in a changing world.  Summarized below (and described in more detail in the second chapter) are the strategic objectives and the next steps that will help realize the full potential of the U.S. bioeconomy. 

1. Support R&D investments that will provide the foundation for the future U.S. bioeconomy. 

Although many studies show that research provides a healthy return on investment, a major justification for government investments in science and technology is to overcome market failures; these occur when private investors invest less in technology than the socially optimal level because they cannot reap the full benefits of their investment.In this context, scientific discovery is a public good that benefits all. 

The pursuit of a greater understanding of natural systems yields knowledge, ideas, and technologies that the private sector can build on, sparking economic growth by giving rise to new products, services, and jobs.  Coordination of Federal bioeconomy-related research activities can improve the efficiency and effectiveness of those investments and is especially important when budget growth is constrained.  Coordinated strategic programs and targeted investments will accelerate progress in biological research and technology areas, and this in turn will drive discovery for an American bioeconomy.

Moving Forward: Coordinated, integrated R&D efforts will help strategically shape the national bioeconomy R&D agenda. 

Expand and Develop Essential Bioeconomy Technologies – Foundational technologies have made possible unprecedented discoveries in biological research.  Multiagency collaborations for emerging foundational technologies such as synthetic biology, biology-related information technologies, pro­teomics, and others are being fostered in order to grow the bioeconomy. 

Integrate Approaches across Fields – The complexity of modern research questions requires that traditional boundaries between fields of study become permeable and programs concentrate expertise from diverse disciplines around societal challenges where it is needed most.  The Administration will pri­oritize additional multidisciplinary efforts to enable biological research at the boundaries of fields, such as physics, chemistry, engineering, computer sciences, and mathematics, that support the bioeconomy. 

Implement Improved Funding Mechanisms – Creating or modifying funding mechanisms to support creative, high-risk/high-reward research can enable researchers to pursue daring—and potentially groundbreaking—research that may be constrained by typical funding mechanisms or approaches.  Agencies should further explore the use of new or modified funding mechanisms in and across agencies to stimulate the discovery of new bioinventions with potential to grow the bioeconomy. 

2. Facilitate the transition of bioinventions from research lab to market, including an increased focus on translational and regulatory sciences. 

If it is to be successful and thrive, the bioeconomy will be based on a steady flow of new products and services that address American needs.  To ensure this flow, policies must be developed and taxpayer dollars must be used responsibly to foster an ecosystem that supports discovery, innovation, and commercialization.  Moving Forward: A dedicated commitment to translational efforts will accelerate movement of bioinventions out of laboratories and into markets. 

Accelerate Progress to Market – An increased focus on entrepreneurship, translational sciences, regulatory science, and technology transfer can help ensure that ideas with potential for application move beyond the laboratory.  Strategic, coordinated investments in translational and regulatory sciences will accelerate progress in many sectors of the bioeconomy.  To capitalize on the promise of the newly reauthorized Small Business Innovation Research (SBIR) program, agencies should evaluate and update SBIR programs.  Some relevant objectives include reducing application response times, hiring/training program staff to enhance relevant in-house experience, and increasing the use of industry experts as peer reviewers to evaluate industry proposals. 

Enhance Entrepreneurship at Universities – Academic research is traditionally disconnected from its economic implications, making it difficult for innovative ideas to progress beyond the lab.  Integrating entrepreneurship and industry involvement into the university research experience will facilitate the path from research to commercialization and help innovative ideas reach the marketplace.  As an additional benefit, students can be exposed to the broader benefits of academic pursuits, as well as introduced to potential future careers in areas outside of academia.  Innovative programs that enhance entrepreneurial activities at universities are needed to help academic discoveries become commercial realities. 

Utilize Federal Procurement Authority – The purchasing authority of the Federal government offers opportunities to help drive some aspects of the bioeconomy.  By procuring biobased and sustainable versions of products used in agency missions, the Federal government supports markets and promotes innovation, while creating jobs in rural America where many of these businesses are located and bio­products are manufactured.  To drive the creation and growth of new bioeconomy markets, Federal agencies should prioritize procurement of biobased and sustainable products where appropriate and cost-effective. 

3. Develop and reform regulations to reduce barriers, increase the speed and predictability of regulatory processes, and reduce costs while protecting human and environmental health. 

Regulations are essential for protecting human health and the environment and reducing safety and security risks associated with potential misapplications of technology.  When they are not carefully crafted or become outdated, however, they can become barriers to innovation and market expansion and discourage investment.

Moving forward: Improved regulatory processes will help rapidly and safely achieve the promise of the future bioeconomy. 

Improve Regulatory Processes and Regulations – Agencies should improve predictability and reduce uncertainty in their regulatory processes and requirements.  To reduce costs and impediments to invest­ments but without compromising safety and efficiency, attention should be given to application review times, sequential reviews by multiple agencies should be coordinated to allow parallel reviews, and specific guidance should be issued in response to stakeholder needs.  When an emerging technology enters the regulatory process, Federal agencies must have a robust framework that identifies lead agency responsibilities, clarifies supporting agency roles, and delivers timely, specific guidance for applicants. 

Collaborate with Stakeholders – Improved agency regulatory processes rely on productive stakeholder collaborations to identify needs and impediments to progress and investment.  Federal agencies should focus on building new, and augmenting existing, stakeholder collaborations to inform efforts, stream­line processes, and reduce costs and response times, while preserving safety and ensuring substantive benefit to public health. 

4. Update training programs and align academic institution incentives with student training for national workforce needs. 

Many jobs in science and technology-related businesses remain unfilled despite high rates of local unemployment.  Opportunities exist to enhance training efforts at all levels to keep pace with chang­ing career pathways.  At the K-12 and undergraduate levels, the Administration has made significant progress in developing approaches to improve science, technology, engineering, and mathematics (STEM) education, and to increase the number and diversity of STEM students.  For example, in 2009, the President launched the Educate to Innovate campaign to move American students from the middle to the top of international rankings in STEM achievements over the next decade.  Building upon and expanding these efforts, particularly with regard to graduate-level training enhancements, would help to align academic institution incentives with training for future workforce needs.  Also needed is the development of metrics to measure progress over time.  Moving forward: Federal agencies should take steps to ensure that the future bioeconomy has a sustainable and appropriately-trained workforce. 

Employer-Educator Partnerships – Foster increased industry participation in the development of programs and in training students at all levels for the future bioeconomy workforce. 

Reengineer Training Programs – Incentives for academic institutions to enhance entrepreneurship and restructure training programs would better prepare the future bioeconomy workforce, whether individuals are bound for careers in industry or academia.Federal agencies should develop incentives for institutions to adapt training to meet the needs of the 21st-century bioeconomy workforce.Following reengineering of training programs, agencies should consider convening industry stakeholders from various sectors to assess the success of training programs to meet the needs of employers. 

5. Identify and support opportunities for the development of public-private partnerships and precompetitive collaborations—where competitors pool resources, knowledge, and expertise to learn from successes and failures. 

Partnerships enable private industry, government agencies, and academic institutions to pool resources and expertise around an idea, dramatically improving chances for success.  Many companies do not invest in early ideas because they are unlikely to pay off immediately.  This is one place where the government can play a crucial role.  The President has emphasized that the Federal government, universities and companies should work together to invent, deploy, and scale the cutting-edge technologies that will create new jobs, spark new breakthroughs, and reinvigorate America today and in the future.  Moving forward: Federal agencies should provide incentives for public-private partnerships and precompetitive collaborations to benefit the bioeconomy broadly

Catalyze Public-Private Partnerships – Great potential exists for partnerships and collaborations where sharing information about successes and failures is anticipated to generate transformative outcomes.  Federal agencies are encouraged to broadly pursue opportunities for effective public-private partner­ships in health, energy, agriculture, and manufacturing to leverage Federal investments and industry investments and expertise. 


While the Blueprint has some notable goals and recognizes the importance of public-private partnerships as part of a broader strategy to stimulate the economy and realize the full promise of biomedical research, in practice, we have not seen much progress on this part in health care.  For example, the Food and Drug Administration (FDA) still has prohibitive policies for including members on their Advisory Committees who work with industry and the National Institutes of Health (NIH) also have significant restrictions on the involvement of investigators in clinical trials who collaborate and work with industry. 

More importantly, we have Congress passing, and CMS implementing, the Sunshine Act, which paints industry-physician/academia collaboration as inherently unethical and wrong by posting such payments publically online so that media and sensationalist critics can continue their careers bashing doctors and professionals for developing new treatments and educating their peers about them.  

How can the Obama administration be calling for more collaboration, more interaction with industry, more investment and resources to be shared with industry, while at the same time, labeling these relationships as “conflicts” and forcing doctors to disclose their work as if they should be ashamed for saving the lives of millions of patients?  The Obama administration cannot plan to recruit doctors, physicians and scientists to enter into these new collaborations and partnerships and reduce the regulatory burdens while also placing a red target on industry’s back.  

Consequently, a telling quote on page 13 sums up public and congressional frustration with the current model of life sciences R&D: “One issue that government and industry must address is that increased investment in research has not resulted in a concomitant increase in approved drugs.”  In a break from the usual call for industry and academia to align primarily along technical and scientific lines, the Blueprint repeatedly calls for deeper engagement, including academic participation in commercialization.  This document is an example of the multiple and seemingly contradictory messages emanating from various policy centers.

Moving forward, there needs to be a more consistent message throughout the Administration and federal health agencies, which recognizes the important role of industry in navigating through the Bioeconomy, one which does not send mixed messages, and demonize relationships.  Instead, the government must begin to recognize that achieving the objectives of this Blueprint will require significant involvement of industry and private stakeholders who have the patients best interest in mind, and are looking to provide important jobs to hardworking Americans and reinvest their earnings in new technologies and resources.


March 22, 2012

Doc Fix Money from Prevention to Pay Physicians

Medicare Services
Earlier this month, President Obama signed legislation (H.R. 3630) that includes a 10-month doc fix.  The $143 billion package delays the Medicare rate cut, which would have been nearly 30%, until the end of 2012. 

After a rare compromise between Republicans and Democrats last week, the bill passed through the House and then Senate, making its way to the President's desk. To fund the $18 billion doc fix, the agreement includes health-related offsets that would save $21.2 billion over the next ten years. 

The measure will cut:

  • $5 billion from the prevention and public health fund created by the federal health reform law;
  • About $4.1 billion in Medicaid payments to hospitals with a disproportionate number of uninsured patients;
  • Payment rates for clinical laboratory services by 2% in 2013, to save an estimated $2.7 billion over a decade;
  • $6.9 billion in "bad debt" payments to hospitals when Medicare beneficiaries do not pay for services; and
  • $2.5 billion in Medicaid funding to Louisiana, which received increased funding from the overhaul 

If enacted, inpatient acute care hospitals will see Medicare bad debt payments reduced to 65 percent beginning in fiscal year 2013, down from the current 70 percent, AHA News Now reported. Critical access hospitals also will see a payment reduction to 65 percent, down from 100 percent, over three years.

“While we support ensuring that physicians will not see their Medicare payments reduced, we are extremely disappointed that once again Congress is putting seniors' access to hospital services in jeopardy through arbitrary reductions to hospitals. Today's proposal would add an unnecessary strain to hospitals that care for vulnerable populations," American Hospital Association President and CEO Rich Umbdenstock said yesterday. 

Calling the cuts "shortsighted," Umbdenstock said the budget would hurt low-income senior patients. "We need thoughtful approaches to improving health care not indiscriminate cuts that harm patients' access to care," he continued.     


As explained by Kaiser Health News, the “doc fix” is a result of yesterday's budget panacea – a 1997 deficit reduction law that called for setting Medicare physician payment rates through a formula based on economic growth and known as the "sustainable growth rate" (SGR).  For the first few years, Medicare expenditures did not exceed the target and doctors received modest pay increases.  But in 2002, doctors reacted with fury when they came in for a 4.8 percent pay cut. Every year since, Congress has staved off the scheduled cuts.  But each deferral just increased the size – and price tag – of the fix needed the next time. 

The formula also reinforces what many experts say are some of the worst aspects of the current fee-for-service system – rewarding doctors for providing more tests, more procedures and more visits, rather than for better, more effective care.  In an Oct. 14 letter to lawmakers, the Medicare Payment Advisory Commission (MedPAC), which advises lawmakers on Medicare payments, called the formula "fundamentally flawed" and said it "has failed to restrain volume growth and, in fact, may have exacerbated it.”

Congress has avoided fixing this problem because it would cost about $316 billion to stop the doc fix cuts over the next decade and Congress can't agree on where to find that kind of cash.  

Physician groups continue to lobby Congress to enact a permanent payment fix. The deal Congress just passed would stop a 27 percent pay cut scheduled to begin March 1 but did not raise the level of Medicare reimbursement to physicians. 

Last October, MedPAC recommended eliminating the formula without increasing the deficit by cutting fees for specialists and imposing a 10-year freeze on rates for primary care physicians. That proposal was strongly opposed by health industry groups, as well as the American Medical Association (AMA). 

The AMA has recommended a five-year transition fee scale that allows time to test new payment approaches, including several being tested as part of the 2010 health care law.

Several other options have been offered to fix the reimbursement scheme, including proposals by Rep. Allyson Schwartz, D-Pa., and the White House, but none has generated strong bipartisan interest. 

The Doc Fix is the gift that keeps on giving.  As long as physicians are protecting their turf from huge pay cuts, there is little to no chance of increases in the physician payment formula.  Also as long a this is an issue physicians will stay engaged in public policy debates.


Preview | Powered by FeedBlitz


November 2015
Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30