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Making His Mark on CMS: McClellan & Cost-Effectiveness

Executive Summary

As the new leader of the Centers for Medicare and Medicaid Services (CMS), Mark McClellan, MD, PhD, faces two immediate priorities in implementing the new Medicare Prescription Drug Act. First, he needs to rollout the temporary drug discount card program. Second, he will oversee the promulgation of regulations to further clarify the law's meaning. But this isn't all that's on McClellan's mind. He's thinking more broadly about his opportunity to run CMS.

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Medicare Drug Coverage: Very Much Still a Work in Progress

After decades of public policy debate, the passage of a prescription drug benefit for seniors-Medicare Part D-hardly settles the issue. Indeed, the heavy lifting really begins now because the recently enacted legislation represents a model drawn more in sand than stone. So there is plenty of time and opportunity for all parties to continue to shape this program more to their liking. For the moment, we do know that seniors are slated for drug coverage beginning in 2006 and price controls are off the table. But there are still major questions concerning the implementation. Looming over the whole debate: the specter of rising costs. The Congressional Budget Office's $400 billion prediction-for the ten years spanning 2004 to 2013-has already been characterized as too low. Bush administration aides estimates that the figure should be closer to $540 billion. Given all this uncertainty, the drug industry should be prepared for rough Medicare seas in the foreseeable future.

Shaking Up the FDA

To improve regulatory predictability, Mark McClellan has plans to reduce multiple-cycle reviews. In addition, he is in the midst of adopting best review practices and developing clearer guidances in therapeutic areas where progress has been slow and in certain emerging areas. While such plans potentially offer good news for the brand-name drug companies--though the benefits will be slow to accrue since the regulatory efficiencies will take years to fully materialize--they won't lower overall system costs since lower development expenses won't necessarily lead to lower average prices. Thus the FDA is focusing on two areas in which it has direct influence on drug costs and reimbursement: speeding the approval of generics and forcing OTC switches. McClellan's desire to impose a cost-benefit mindset on the agency attempts to balance the needs of the drug industry with the needs of reimbursers, particularly the Federal government as it prepares to shoulder the new burden of Medicare outpatient drug costs.

Keeping Track: More Rx-To-OTC Switches On Deck After US FDA’s OTC Narcan Approval; Iovance Looks To Bring Cell Therapy To Melanoma

The latest drug development news and highlights form the Pink Sheet’s US FDA Performance Tracker.


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