June 22, 2016
The Honorable Jan Schakowsky
2367 Rayburn House Office Building
Washington, DC 20515
Dear Representative Schakowsky:
On behalf of the National Committee to Preserve Social Security and Medicare’s millions of members and supporters, I write to endorse the Price Relief, Innovation and Competition for Essential Drugs (PRICED) Act, which would reduce the market exclusivity period for biologics from its current 12 years to seven years. Your legislation will lower costs for both the Medicare program and seniors directly.
Under the Patient Protection and Affordable Care Act's (PPACA) Biologics Price Competition and Innovation Act (BPCI), new biologics are eligible for 12 years of market exclusivity. During this exclusivity period, the U.S. Food and Drug Administration (FDA) cannot approve a lower-cost biosimilar to compete against the innovator product.
Long exclusivity periods delay competition and drive up drug costs. Long exclusivity periods are particularly problematic for biologics because of their significant expense. Biologics disproportionately account for high-cost drugs paid for by Medicare. Biologics are more likely to be paid for by Part B because they are usually physician-administered since they have to be injected or infused. A Government Accountability Office study found that nearly two-thirds of new Part B drugs had expenditures per beneficiary in excess of $9,000 in 2013. The same study found that sixty one percent of the 83 new Part B drugs approved by the FDA from 2006 through 2013 were biologics, compared to 16 percent of new non-Part B drugs. According to a 2015 report by the Medicare Payment Advisory Commission (MedPAC), the top ten drugs made up half of Part B drug spending. Eight of those top ten drugs are biologics.
Under Medicare Part B coinsurance requirements, beneficiaries who use expensive drugs shoulder 20 percent of the costs of their drugs. And there is no out-of-pocket cap for Part B expenses. In 2013, beneficiaries' share of the cost of expensive new drugs ranged from $1,900 to $107,000 per drug. While many beneficiaries have supplemental insurance to help pay for their out-of-pocket costs, the impact on beneficiaries who need these drugs and who are without supplemental coverage can be devastating.
Although most biologics are covered under Part B, some biologics are covered by Part D. One study found that nearly all Part D plans cover at least one biologic for rheumatoid arthritis. The vast majority of plans require high cost sharing for these drugs and pose a significant financial burden to beneficiaries.
The June 2016 MedPAC report underscores the continued pressure that drug pricing is placing on the Medicare program and on beneficiairies. MedPAC estimates that in 2013 Medicare paid for $112 billion for drugs, which was 19 percent of total Medicare spending and one-third of all U.S. pharmaceutical sales for 2013.
The National Committee strongly supports your legislation because it will allow competitors to enter the market more quickly to drive down the price of biologics, which are currently straining beneficiaries’ and Medicare’s finances.
President and CEO