The US Congress's return to Washington last week following a tumultuous August recess was met with a flurry of activity setting the stage for healthcare reform battles that could last through to the end of the year.

During lawmakers' first week back in session, the leader of the pivotal Senate finance committee unveiled a reform framework that represents the most moderate approach taken by five congressional committee leaders. It also includes provisions from PhRMA's agreement to trim $80 billion in healthcare costs over 10 years.

Also last week, President Barack Obama delivered a widely anticipated speech to a joint session of Congress, calling on lawmakers to pass healthcare reform this year and refuting claims about current legislative proposals that sparked hostile town hall meetings in August. Though his speech was hardly groundbreaking and appeared to do little to attract Republican support for current Democratic legislative proposals, it may have helped rally Democratic lawmakers and sway some leading liberals to accept legislation that lacks a strong government-run insurance plan.

With these two major developments as a backdrop, the US Census bureau announced the number of people without health insurance last year reached 46.3 million, maintaining a steady level of 15.4% of the population that lacks coverage.

At least one question in the healthcare debate was settled last week. Senate Democrats announced that Tom Harkin of Iowa would take the helm of the Senate health committee, whose leadership chair was left vacant by the recent death of Edward Kennedy of Massachusetts. Senator Chris Dodd of Connecticut, who shepherded reform legislation through the panel in July during Kennedy's illness, said he would continue to help lead the committee's efforts to fix the healthcare system.

"Gang of Six"

Democratic senator Max Baucus of Montana, chairman of the finance committee, announced that he would introduce his long-awaited healthcare reform bill this week, with plans to begin a committee mark-up, or voting, on the measure next week.

Mr Baucus's committee is the only relevant panel in either chamber that has yet to act on a reform measure because he has been negotiating for months with two other Democrats and three Republicans on the committee to develop a bipartisan agreement. "The time has come for action, and we will act," Mr Baucus said. "We must move forward if we are going to get this bill done by the end of the year."

The Montana senator released a framework of comprehensive healthcare reform on which he sought comment from the bipartisan negotiators, dubbed the "Gang of Six", before he introduces a bill.

That framework reflects PhRMA's commitment to subsidise 50% of the out-of-pocket cost of branded medicines when Medicare beneficiaries reach the coverage gap, or "doughnut hole", in their Part D plan ( scripnews.com, June 23rd, 2009).

higher rebates, new fees

The framework also includes an eight percentage point increase in the Medicaid minimum rebate for branded medicines, from 15.1% to 23.1%. Medicaid rebates would be applied to Medicaid managed care organisations and also to new formulations of existing drugs, except for orphan drugs, under the plan. Prescription drug coverage would become a mandatory Medicaid benefit, and Medicaid plans would have to cover certain drugs that are currently deemed excludable, including smoking cessation therapies, barbiturates and benzodiazepines.

The measure also proposes an annual fee on pharmaceutical manufacturers, totalling $2.3 billion, that would be allocated by market share.

The provisions on narrowing the Part D doughnut hole, increased Medicaid rebates and manufacturer fees based on market share were all part of PhRMA's June agreement with Mr Baucus and the White House to reduce drug costs by $80 billion over 10 years – a pact that has come under attack by liberal Democratic leaders in the House, and even some Republicans, for not going far enough in terms of cost savings.

PhRMA senior vice-president Ken Johnson told Scrip the branded industry committed to paying company fees of $2.3 billion a year, totalling $20.3 billion over 10 years, that would go into a healthcare fund. The framework appears to reference only the fees agreed to by the innovative industry, and it remains unclear whether generics manufacturers would also face a new fee. PhRMA's Mr Johnson said that when the innovator trade group was negotiating the deal, it had the understanding that some type of fee would also be assessed on generics companies.

The framework includes a two percentage point increase in the Medicaid rebate for generics, from 11% to 13%.

The generics industry association GPhA told Scrip it had not agreed to either new manufacturer fees or increased Medicaid rebates. The group said generics provided substantial savings to the healthcare system already, reaching $121 billion last year alone, according to a GPHA-commissioned analysis by IMS Health.

Healthcare reform measures should focus on increasing generic utilisation rather than taxing generics companies and increasing their government rebates, GPhA said. It previously has estimated that a 1% increase in the generic utilisation rate in the Medicaid program could yield approximately $490 million in added annual savings.

The Baucus framework would require all US citizens and legal residents to have health insurance beginning in 2013. Although it does not call for the "public option" of a government-run health plan that would compete with private insurers, it includes expanded Medicaid coverage and the establishment of non-profit co-ops that would provide insurance to individuals and small businesses.

The measure also creates a non-profit institute to conduct comparative effectiveness research, with funding of $600 million per year coming from mandatory appropriations, Medicare and a fee on health insurance plans. Under new transparency provisions, drug and biological manufacturers would be required to report payments to physicians or teaching hospitals, and this information would become publicly available.

It is widely believed that the finance committee's measure, which will take a far more moderate and fiscally conservative approach than legislation passed by the health committee in July, has the best chance of getting through the narrowly divided Senate. Democrats and their independent allies currently fill 59 of 100 seats in that chamber. However, this is not enough to overcome procedural delay tactics that could be used by Republicans, unless Democrats wanted to resort to a drastic measure known as "reconciliation" that would only require 51 votes for certain types of budget-related initiatives.

public plan

The debate over the public plan has been a key stumbling block in healthcare reform negotiations. Republicans, with support from the insurance and pharmaceutical industries, have steadfastly opposed a public plan, saying it would amount to a government takeover of healthcare and make it impossible for private insurers to compete.

Liberal Democrats, including key leaders in the House, had previously said they would not support any legislation that lacked a robust public option. However, some House leaders, including speaker Nancy Pelosi, seemed to back away from those threats following President Obama's September 9th speech to Congress.

In that address, Mr Obama made clear that he still favours a public option but described it as "only a means to an end" and urged Democratic lawmakers to remain open to other ideas that accomplish the goal of ending insurance company abuses and making coverage available for those who currently lack it.

"Some have suggested that the public option go into effect only in those markets where insurance companies are not providing affordable policies. Others have proposed a co-op or another non-profit entity to administer the plan. These are all constructive ideas worth exploring," Mr Obama said. "But I will not back down on the basic principle that if Americans can't find affordable coverage, we will provide you with a choice."

The day after the speech, Ms Pelosi said that although she has not seen an idea that is superior to a public plan, "it could be there. This is about a goal, it's not about provisions."

It seems increasingly likely that some sort of trigger-based option will be adopted, whereby private insurers would be given a certain period of time to expand coverage at affordable rates in a state or else face competition from a publicly run plan. Democrats have been discussing such an option with Maine Republican senator Olympia Snowe, one of the Gang of Six.

In his speech to Congress Mr Obama outlined his vision of what a healthcare reform plan should include. The address was notably short on specifics as to how the measure, estimated to cost $900 billion over 10 years, would be funded. Asserting he would not sign a bill that adds to the federal deficit, he said reducing waste and inefficiency in the Medicare and Medicaid programmes would pay for most of the plan, and "much of the rest would be paid for with revenues from the very same drug and insurance companies that stand to benefit from tens of millions of new customers".

The speech also offered little in the way of new proposals, save for moving forward on plans for demonstration projects to reduce medical malpractice lawsuits.