PPTA Statement: Effects of Sequester on Plasma Protein Therapies

Last week, the President and Congress could not come to an agreement and on March 1, 2013 sequestration, $85 billion in across the board federal spending cuts, went into effect.

While the full ramifications of these sweeping cuts remain to be seen, reductions in healthcare spending in the Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA) will likely have a negative impact on innovation and access to care for vulnerable rare disease patient populations including the users of plasma protein therapies.

Likely the greatest impact on the plasma protein therapeutics industry, beginning April 1, 2013 Medicare (excluding beneficiaries) will be subject to cuts capped at 2 percent. This cut includes a reduction of Medicare payments for Part B physician-administered drugs in the physician office (currently set in statute at ASP +6 percent) and hospital outpatient department (currently set in regulation at ASP +6 percent in FY13) settings. The 2% cut to ASP reimbursement could shift some Medicare patients using plasma protein therapies from the physician office into the hospital outpatient department setting for their infusions and curtail access for vulnerable patients who use these therapies. Medicaid is exempt from the sequester. Here are the reductions that federal agencies related to our industry are facing:

  • About half of the $85 billion in cuts under the sequester in FY13 are non-defense related cuts,

  • Medicare spending (excluding low-income and catastrophic subsidies for Part D and the qualifying individual program) is subject to a straight two percent cut totaling approximately $11.1 billion,

  • According to Bloomberg Government, the Department of HHS will cut its budget by about $16 billion,

  • The FDA is facing nearly $209 million reduction,

  • Health Resources and Services Administration (which oversees the 340B program) will cut roughly $385 million from its budget,

  • The Center for Disease Control and Prevention (CDC) will have to absorb an approximately $303 million reduction in spending, and

  • The National Institutes of Health (NIH) is facing a staggering cut of about $1.6 billion to medical research.

Additionally, new increased user fee rates were established into effect under Prescription Drug User Fee Act V (PDUFA V) reauthorization signed into law in July 2012, allowing the FDA to collect more money to support new drug application and biologics license application reviews. The established rates for FY 2013 for application fees for an application requiring clinical data ($1,958,800), for an application not requiring clinical data or a supplement requiring clinical data ($979,400), for establishment fees ($526,500), and for product fees ($98,380) are effective as of October 1, 2012, and will remain in effect through September 30, 2013. Even though, by law, they cannot be used to pay down the deficit, it is believed that the roughly 5.1 percent cut to FDA's budget will also subject user fees to the sequester. It has been reported that the Administration is asking Congress to lift the current caps on the FDA's access to user fees in order to help prevent any further delays in new drug or device approvals.

The effects from sequestration are wide-ranging. Because of the massive budget cuts facing government agencies, many federal workers may be affected by furloughs or even potential cuts to personnel. While doctors, hospitals, and other providers will all face lower reimbursements, medical schools and teaching hospitals could also see cuts to funding that supports doctor training, and food inspections and drug and device reviews could face delays.

While the conversation continues on the sequester regarding restoring funding to many programs, Congress has now set its sights on the expiring FY13 Continuing Resolution, a temporary measure that funds the federal government at current levels. Today, House Republicans introduced a plan which would keep the sequester in place, but would restore more than $7 billion in defense cuts. It remains to be seen if Congress can come to an agreement with the President, by March 27, on a funding measure that would avert a government shutdown.

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