Playing with $6 Billion: CBO Unveils Follow-On Biologics Savings Estimates

The analysts at the Congressional Budget Office have been busy little beavers. As we cautioned earlier, CBO has been actively scoring the possible cost savings of the introduction of follow-on biologics in the US through an abbreviated pathway.

The agency released the estimates June 25 and the numbers certainly will re-ignite the follow-on biologics debate. Using the Senate Biologics Price Competition and Innovation Act to evaluate savings, CBO found FOBs would save $6.6 billion in direct government spending over a 10-year period, beginning in 2009. That's real money. To read the full analysis, click here.

The $6.6 billion comes in higher than some of the lower-end estimates and at about half the amount of the higher-end estimates. Two points to consider:

Timing: Releasing the savings analysis on June 25 begs a few questions to be asked. Were the findings unveiled ahead of the July Congressional recess so they could not be acted upon swiftly by lawmakers looking for a rest? Or does the scoring have a relationship to the Medicare package, which includes the physician payment cut offset, that just passed through the House? After all, the $6.6 billion would serve as a nice bargaining chip for the physician payment fix? Or is it all a coincidence?

Although we don't believe in coincidences, we have not heard from any sources with a stake in the game that FOBs will be attached to the Medicare package, which already has its share of somewhat controversial provisions like e-prescribing and codifying the six "protected" drug classes under Medicare Part D. To read more, click here.

Still, you never know what's going on behind closed-door negotiations, especially considering the exclusive number of Congressional leaders who are crafting the legislation. But the odds are quite small that FOBs gets attached to a must-pass Democratic or Republican offering because it would require serious and immediate action from the Senate HELP and Judiciary Committees, specifically Ted Kennedy (D-Mass.), Orrin Hatch (R-Utah), Hillary Clinton (2nd Place, Democratic nominee for President) and Mike Enzi (R-Wyo.).

How Will House Leadership React: Because the Senate HELP Committee requested the CBO analysis, it is based on the BPCIA, which gives innovators a period of 12 years of data exclusivity. At this point, that's a biotech-friendly period of exclusivity. House Committee for Oversight and Government Reform Chairman Henry Waxman (D-Calif.) and House Energy and Commerce Chairman John Dingell are understood to be looking at eight years of exclusivity and less. So they would, no doubt, hold up any legislation that includes FOBs and 12 years of exclusivity. That's not to say 12 years ends up getting the axe; we're just saying there's no way it stays 12 years without a fight from Waxman and others.

Here's an interesting take from one knowledgeable source:

"It is worth considering that the starkly competing and now “switched” views coming out of the two “sides” of the industry – GPhA essentially saying the score means the current legislation is bad and needs to be fixed (presumably by the next Congress), and BIO essentially saying the score means the current legislation is good and needs to be passed by this Congress – could result in the perception of a “draw” in the clash of the titans, which begs the question as to whether there would be sufficient momentum to get this onto the Medicare package or any other vehicle during the 110^th based upon this score....Of course, stranger things have happened in this and past Congresses."

While we don't think, as of this moment, FOBs will get attached to a Medicare bill, the $6.6 billion in savings and the timing of the release is turning out to be a real bee in our bonnet. Why now? We'll continue to investigate. In the meantime, take a look at the CBO analysis. There's a lot to digest.