News

Obama budget protects healthcare spending. So is it realistic? (Morning Read)

Among today’s current medical news: a breakdown of an Obama budget proposal that is generally, but not completely, positive for the medical industry. It boost some medical research funding and preserves the Doc Fix but realizes savings on the backs of biotech and pharma. It doesn’t rollout malpractice reform but instead increases funding to experiment with tort reform.

Current medical news and unique business news for anyone who cares about the healthcare industry.

Obama budget. President Obama unveiled a hands-off-Medicare budget that increases spending for the National Institutes of Health, salvages the Doc Fix and mildly increases the budget of the U.S. Food and Drug Administration in part to streamline a process to approve generic drugs.

In a budget that is supposed to be about budget cuts, science — for the moment — considers the proposal a victory for research. Here are some of the other highlights.

  • Pharma gets the squeeze. The budget includes a $2.3 billion savings by allowing generic versions of biologic drugs to get to the market faster. Another $8.8 billion is saved by restricting “pay-for-delay” agreements that could delay generic entry into the market.
  • FDA differences. The President’s budget for the agency is at $2.7 billion while Republicans are considering a $2.1 billion budget.
  • A broader malpractice experiment. Instead of changing policy, Obama increases the amount of grant money — up to $250 million — for states to develop and implement alternatives for medical malpractice.
  • The Doc Fix non-fix. It remains, but critics of the band-aid approach grow: “A two-year fix is obviously not a permanent fix, nor is making sure doctors get their full reimbursements by squeezing blood out of Medicaid outlays seem all that sustainable, (or necessarily equitable.)”
  • Defense research cut. While the NIH gets a boost, research spending in the Department of Defense drops by about 5 percent.

There’s a lot of attention paid to the Obama budget. But there’s also a sense that the Obama budget is a sideshow: it’s a rough draft that won’t be passed and will be heavily revised in Congress. And even with a budget that’s generally generous to the medical industry, the Obama administration will be in for a fight from some of the more more powerful industry trade groups.

John J. Castellani, president of the Pharmaceutical Research and Manufacturers of America, said the Obama budget would diminish crucial incentives for future U.S. medical innovations.

“While we understand the need to reduce the deficit, policies such as these represent the wrong approach,” Castellani said in a statement.

Jim Greenwood, president of the Biotechnology Industry Organization, said a reduction in market exclusivity for biologic drugs is “not going to happen.”

Greenwood said his industry demonstrated in the last Congress that it had a political coalition to support 12 years of exclusivity. “Now we have a Republican majority in the House; they are not going to stand for backtracking on biosimilars,” he said. “I don’t believe the Senate is either.”