Drugmakers back in spotlight as reform amps up

WASHINGTON (Reuters) - Pharmaceutical companies defended themselves on Tuesday against complaints about rising medicine prices that could reestablish the drug industry as a political target in the U.S. health reform debate.

An early deal with some Senate Democrats and the White House largely shielded the $315 billion industry, but recent reports from Wall Street and consumer groups that drug prices have risen nearly 10 percent this year brought the companies under a harsh spotlight.

"These reports do not reflect the way that the prescription drug market functions and therefore exaggerate prescription drug price trends," Richard Smith, senior vice president of policy at Pharmaceutical Research and Manufacturers of America (PhRMA), told a House Energy and Commerce health panel.

At the same time, the industry braced for a bipartisan push in the Senate to allow the importation of cheaper medicines from Canada and other countries as part of the larger health reform legislation.

IMS Health recently forecast higher U.S. drug sales as companies squeeze earnings from dozens of widely used medications before they hit the so-called "patent cliff" and face cheaper rivals over the next few years. Generic versions of drugs such as Pfizer Inc's blockbuster cholesterol pill, Lipitor, and others could cost the industry tens of billions of dollars.

But such price increases come amid an already-contentious debate over how to overhaul the nation's healthcare system and has some critics crying foul, especially Democrats in the House of Representatives, who were not part of any industry deal and seek greater payouts from drug manufacturers in its version of the reform bill in terms of prices and rebates.

Democrats and consumer groups charge the pharmaceutical industry is profiteering ahead of anticipated reforms that could reduce industry profits through larger government rebates from the drugmakers, as well as other concessions.

"I have no doubt that the pharmaceutical companies are running up the price in anticipation of health reform," said Representative Zachary Space, an Ohio Democrat.

The AARP, which represents about 40 million older Americans, released a report in November about the rising prices that prompted Democrats in both the House and Senate to seek outside investigations. On Tuesday, Bonnie Cramer, head of AARP's board of directors, said high prices can force patients of all ages to skip needed therapies.

"Many consumers report that they have not filled prescriptions, skipped doses, or cut pills in half," Cramer, whose group lends its name to some health insurance policies sold by UnitedHealth Group Inc and Aetna Inc and backs the Democrats' health reforms, told House lawmakers.

Republicans at the hearing criticized Democrats for holding the hearing before investigations by the Government Accountability Office and the Department of Health and Human Services' inspector general were complete.

"RE-IMPORTATION"

In the Senate, where drugmakers brokered a deal months ago to finance $80 billion over 10 years for health reform efforts, a bipartisan group of lawmakers wants to allow U.S.-licensed pharmacies and wholesalers to import medication from overseas.

The pharmaceutical industry -- one of the few health industries to back the Democrats' health overhaul plans and certainly the one with most financial leverage -- has been fighting importation for years.

The amendment could be taken up by the Senate as early as Tuesday afternoon and would allow medications approved by the U.S. Food and Drug Administration from Canada, Europe, Australia, New Zealand and Japan.

Critics say even FDA-approved drugs cannot be deemed safe when they are imported. Supporters, including AARP, say importing drugs, or "re-importation," offers consumers safe, cheaper alternatives.

Senator Byron Dorgan, a North Dakota and lead backer of the amendment, told reporters not all senators agree with the deal.

"There is nothing else in the healthcare legislation that will deal with prescription drug prices," he said.

The move signals some risks for pharmaceutical companies as Congress' health reform legislation moves beyond the committee that arranged the original 10-year deal.

Senate Finance Committee Chairman Max Baucus, whose committee helped broker the deal with the Obama administration, said last week drugmakers may end up paying more when the chamber's version of the bill is finally passed.

Some Wall Street analysts have pointed to a potential $100 billion final price tag for drugmakers, who so far say they expect their share to remain in the same $80 billion ballpark.

Democrats are pushing to a vote on a final Senate bill by the end of the month. The measure would then have to be consolidated with the already-passed House bill before President Barack Obama could sign it into law.

At the House hearing, pharmaceutical researcher Stephen Schondelmeyer said current price increases would make up for the industry's concessions under the current deal.

"The current price increases for this year may have come close to wiping out the whole $80 billion over the next 10 years," said Schondelmeyer, a University of Minnesota professor.

Drugmaker shares were off less than one percent in late afternoon trading on the NYSE Arca Pharmaceutical stock index, roughly in line with the U.S. market overall.

(Reporting by Susan Heavey; additional reporting by John Whitesides and Donna Smith; editing by Maureen Bavdek and Andre Grenon) AZN.N>