Legislation to provide pharmaceutical coverage for 40 million Medicare beneficiaries is the industry's prime challenge in 2003. The high cost of a pharmacy benefit plan for seniors is likely to encourage generic prescribing and other strategies to rein in pharma prices.

Added pressure to hold down medical costs will come from the growing campaign to expand access to healthcare. Former vice-president Al Gore is high- lighting the plight of the uninsured, and Senator John Kerry (D, Massachusetts) championed coverage for all in announcing his bid for the Democratic nomination in 2004. Although Democrats want to expand federal and state healthcare programmes, Republicans seek to increase tax credits to help consumers purchase health insurance.

An emerging initiative for the Bush administration is to rein in what many call "junk lawsuits." In addition to creating the Department of Homeland Security (DHS) last November, Congress approved a new federal terrorism insurance programme. The measure reflects strong White House interest in addressing liability issues as one way to spur economic activity while controlling healthcare costs.

Last year the House approved a medical malpractice reform bill that limited class-action lawsuits and set caps on punitive damage awards. The measure is likely to re-emerge, and this time it will gain a hearing in the Senate. Physicians have made tort reform their top legislative issue, creating an opportunity for pharma companies to seek limits on damages in lawsuits claiming injury from drugs or vaccines.

But any kind of liability reform faces a tough fight. The DHS legislation generated an outcry over a little-noticed provision extending liability protections to vaccine manufacturers hit by lawsuits linking the preservative thimerosal to autism in children. The measure requires plaintiffs to file action under a special liability program for vaccine makers, instead of bringing suit in state courts. The change is a boon for Eli Lilly, a situation that guarantees Congress will focus on it and other general liability issues this year.

Protecting Patents

Pharma cost and access issues also are raising challenges to intellectual property protection on Capitol Hill and around the world. Although industry blocked last year's changes to the Waxman-Hatch Act, which threatened to limit patents on innovator products, numerous measures are surfacing that address brand name-generic competition.

A broader challenge to international patent rights involves efforts by developing nations to amend the WTO TRIPs agreement to expand access to generic copies of patented medicines. Negotiated at Doha in 2001, TRIPS permits poor nations without domestic production capacity to import generic versions of medicines to combat national health emergencies.

Now newly industrialized nations want similar rights to import generics, and they want to extend the policy beyond treatments for AIDS, malaria, and TB. US trade negotiators and pharma companies seek to limit both the list of nations eligible to import under compulsory license and the range of applicable health conditions. The debate will continue as demand rises for affordable treatments to combat AIDS and third-world diseases.

-- Pharmaceutical Executive