November 22, 2006

Fossett on the Mess Over Who Will Own California Stem Cell Cures

David Jensen, whose California Stem Cell Report is the ultimate source for all things California, has been following a largely invisible debate between the California Institute for Regenerative Medicine (CIRM) and the California biomedical industry over the pricing and accessibility of therapies developed from CIRM funded research. While the terms of the debate are complex, briefly CIRM wants to impose requirements for preferential pricing for California purchasers for whatever therapies ultimately emerge from CIRM sponsored investigations. The biomedical industry is resisting these efforts, claiming CIRM’s proposed regulation is redundant with existing federal and state laws on pricing for outpatient prescription drugs and not very well defined for other types of diagnostic tools or therapies. Drug manufacturers are required to give state Medicaid programs discounts or rebates on prescription drugs sold at retail, for example, but drugs administered in a physician’s office or outpatient clinic (such as chemotherapy for the treatment of cancer) are not subject to these requirements. Medicaid can and does decide what it will pay for a particular chemotherapy, but the state gets no rebate.

Discussions over intellectual property are not the usual places where decisions over pricing, coverage, and accessibility get made. These decisions are usually made by public and private payers about particular drugs used to treat particular conditions that have been through clinical trials, received FDA approval for particular uses, and have at least partially known strengths and weaknesses relative to other treatments for the condition. At least as importantly, they take place in the context of particular sets of economic relationships that aren’t the same for all specialties or all drugs. Specialists such as oncologists who administer drugs in their offices, for example, get considerable income from “buy and bill” arrangements under which they buy therapeutic agents and “sell” them to the insurance company paying the bills, usually at a considerable mark-up, while physicians who treat by prescription are less dependent on pharmaceuticals for income. We know none of these things about whatever therapies will emerge from CIRM’s research program and won’t know them for a while, so it’s difficult to say what a “fair” outcome is going to wind up looking like.

Perhaps more importantly, trying to tie product pricing to the award of a research grant really doesn’t address the question of appropriate access because CIRM’s not the one that will be making the decisions about how and whether stem cell therapies will be available under what conditions and to whom, either in California or elsewhere. These decisions will be made by Medicaid programs, Medicare, and private insurance companies; all of whom will be trying to balance access to new treatments with affordability. In typical American fashion, these decisions will likely be made in a decentralized fashion and they won’t be the same everywhere. Jamie Robinson of Berkeley, who’s one of my favorite health economists (that’s a VERY short list), has a great article in the last issue of Health Affairs on how insurance companies are managing the use and cost of the current wave of biopharmaceuticals. There are also several excellent articles in that same issue on Medicare’s attempts to set a reasonable policy for dealing with newly emerging technologies. What’s NOT there, and should be, is any description or assessment of how state Medicaid agencies are making these same determinations. Demands that California get a price break on stem cell therapies are probably unavoidable politically, but advocates who want to insure that lower income groups get appropriate access to these therapies should be looking to Medicaid rather than CIRM to make that happen.
Jim Fossett, AMBI/Rockefeller Institute Federalism and Bioethics Initiative

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