Drug companies that had agreed to support the Obama administration on health care reforms have found themselves once more at odds with the president, this time on exclusive rights to produce drugs that treat illnesses like arthritis, cancer and multiple sclerosis.
Though the drug companies had offered to cooperate with the White House -- and even spend upwards of $150 million on ad campaigns -- to support President Obama's calls for an overhaul of health care, they are fighting calls to reduce their "data exclusivity" to high-end "follow-on biologicals."
FOB drugs are not the same as pharmaceuticals like Prozac that a company patents for a certain number of years until other companies can replicate generic forms of the brand-name drug. Biologics are cutting-edge, new-wave drugs derived from living plant and animal cells and can cost upwards of $20,000 to $25,00 per year. About 600 of those drugs currently are on the market.
Congress has backed drugmakers who want to hold on to their data exclusivity for 12 years before letting other companies develop similar versions of their products. On Tuesday, the president called for drug companies to reduce that span to seven years. He has an ally in the AARP, the nation's largest seniors group.
"We think that's excessive," said John Rother of the AARP said of the 12-year exclusive. "We think consumers should be able to buy lower price drugs, these are life-saving drugs today they can cost $10,000 a month and more. We don't think it's justified to keep prices that high when we're talking about saving lives."
The drug manufacturers, however, say companies should have a longer time to keep their product exclusive since they spent so much money on bringing the drug to market in the first place.
"On average it's about $1.2 billion a company spends to get a biologic on the market. And that's well before the cost of actually building a facility, to manufacture the biologic, which often times run anywhere from a quarter billion to half a billion dollars to get on the market," said Lori Reilly, vice president of policy for the Pharmaceutical Research and Manufacturers Association.
The debate has rattled a deal that had been made between the White House and the drug companies to get the pharmaceutical industry on board with health care reform.
In that deal, PhRMA agreed to cut its expected costs for drugs bought by taxpayers by up to $80 billion over 10 years. According to reports, in exchange the White House agreed to oppose congressional efforts to use the government's leverage to negotiate lower drug prices and to not pursue Medicare rebates that would be costly to pharmaceutical companies.
On Thursday, White House spokesman Robert Gibbs denied that the president had agreed to make concessions that would put the administration at odds with Congress. He added that Obama was not interested in trying to renegotiate that deal to get more concessions.
"The Finance Committee and PhRMA agreed to $80 billion in costs savings, part of which goes to fill the donut hole for seniors as part of Medicare Part D," he said. The donut hole calls for the government to stop its payments for drugs for seniors after a certain point and then reinstitute them to pay for catastrophic costs associated with drug purchases.
"I don't think the president meant you could take a $80 billion agreement and make it 95," Gibbs said.