Health care represents one of the biggest components of President Barack Obama's 2012 budget, yet within that realm there stands to be some winners and some losers.

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Analysis: Health care in Obama's 2012 budget plan

February 17th, 2011

WASHINGTON – Health care represents one of the biggest components of President Barack Obama's 2012 budget, yet within that realm there stands to be some winners and some losers.

Of the $3.7 trillion budget proposal unveiled by Obama this week, nearly 23% is earmarked for health care-related expenditures, a larger share than other major areas of federal spending such as Social Security (20%), national defense (19.3%) and income security (14.5%).

The hefty allocation for health care reflects the public sentiment. A Harris Poll released Wednesday showed that a large majority of Americans oppose cuts to federal health care programs, even though many economists think such spending is rising at an unsustainable rate.

Of nearly 2,600 people surveyed by Harris, 67% said they oppose cuts to federal health care expenditures, while just 24% favored cuts. Among those against cuts, 35% supported increased health care spending, and 33% wanted spending levels sustained. Of those in favor of health care spending reductions, 12% supported a major cut and 12% supported a minor cut. 

Within health care, the 2012 budget plan would hike spending by the Food and Drug Administration and pare funding for the Department of Health and Human Services (HHS) for the first time in the agency's 30-year history. 

The FDA would get a 33% increase, or about $1 billion in added funding in fiscal 2012. More than half of the increase, or $634 million, would be from fees paid by drug, tobacco, food and medical device companies.

The funding includes $124 million to develop a pathway for biosimilars, generic versions of biotechnology drugs. Along those same lines, the budget also calls for cutting the length of time that pharmaceutical manufacturers can exclusively market branded biologic drugs, from 12 years to seven years.

President Obama aims to halt "pay-for-delay" deals between branded and generic drug makers.

Obama also sought to end controversial "pay-for-delay" deals that let branded and generic drug companies settle patent challenges with payoffs that delay lower-cost rivals from getting to market. The spending plan would give the Federal Trade Commission the power to block such deals.

The proposal for a biosimilar pathway is a more dramatic version of a similar provision included in the health care reform law. That statute gave brand name pharmaceutical companies a dozen years of exclusive sales for biologics. Generic drug companies had fought for a shorter period, and administration officials said in budget documents the seven-year proposal "strikes a balance between promoting affordable access to medication while at the same time encouraging innovation to develop needed therapies."

The action would generate savings of $80 million starting in 2015 and could save $2.3 billion from 2012 to 2021, the White House estimated. Eliminating pay-for-delay deals would save another $540 million starting in fiscal 2012 and nearly $8.8 billion through 2021, the administration added.

HHS, however, was targeted for a 2% cut, or $892 billion, even with its two largest programs, Medicare and Medicaid, growing more than 8% a year. The president said Medicare and Medicaid can realize savings via reduced spending on prescription drugs and fraud elimination.

The budget provides substantially more funding for research into cancer, infectious diseases and new drugs. But spending to help states and cities prepare for health crises like pandemic flu would be slashed.

The spending plan asks for $31.8 billion for the National Institutes of Health in 2012, up $745 million from what was provided in 2010. NIH director Dr. Francis Collins is expected by this fall to open a new drug discovery center for which the administration is requesting at least $100 million.

The administration also wants to increase the budget of the National Institute of Allergy and Infectious Diseases, which finances much of the country’s research on HIV and AIDS, by $100 million, to $4.9 billion. Funding for the National Cancer Institute would be increased by $95 million, to $5.2 billion.

The FDA would also get $49 million to improve the regulatory pathway and review-and-approval process for products relying on new and emerging technologies.

With the release of the president's budget this week, the chain drug retail industry made a point to spotlight the role of pharmacy services.

"The unveiling of the administration's budget proposal is a time-honored tradition in Washington, D.C.," Steve Anderson, president and chief executive officer of the National Association of Chain Drug Stores, said in a statement. "NACDS views this as another opportunity to emphasize again the important role of pharmacy services as a bipartisan solution to an ongoing challenge: reducing health care costs while improving people's lives, particularly in the treatment of chronic conditions."

Anderson cited pharmacists' pivotal role in promoting medication adherence, via medication therapy management (MTM) services, as an avenue for making health care more effective and less costly. Specifically, he urged Congress to advance the Medication Therapy Management Empowerment Act (S. 274), introduced earlier this month by Sen. Kay Hagan (D., N.C.).

"Pharmacy services provide effective and bipartisan solutions for many of the challenges that continue to face health care delivery in this nation, and for many of the questions that seem to arise every year when budgetary concerns emerge front and center," Anderson stated. "NACDS is analyzing the specific provisions included in this year's budget proposal and looks forward to continuing to work on a bipartisan basis for the good of pharmacy patient care."

Meanwhile, data released Thursday by Standard & Poor's suggest that health care costs are increasing at a more moderate pace.

The S&P Healthcare Economic Composite Index indicated that the average per-capita cost of health care services covered by commercial insurance and Medicare programs rose 6.06% over the 12 months ended in December 2010, which S&P noted is the seventh straight month in which it has seen a deceleration in the annual rate of change for the index. The annual rate of change is down 2.68 percentage points from its May 2010 peak reading.