BUDGET RECONCILIATION CONFERENCE COULD BEGIN AS EARLY AS JUNE 29 FOLLOWING SENATE PASSAGE OF LEGISLATION ON JUNE 25; MEDICAID FORMULARIES AUTHORIZED

Executive Summary

A House-Senate conference could begin consideration of budget reconciliation legislation as soon as June 29. The Senate adopted a budget bill June 25 by a 50-49 vote, with Vice President Gore supplying the deciding margin at 2:58 a.m. Senate conferees are Finance Committee Chairman Moynihan (D- N.Y.); Democratic Sens. Mitchell (Maine), Rockefeller (W. Va.), Baucus (Mont.), Bradley (N.J.) and Riegle (Mich.); and Republican Sens. Dole (Kan.), Packwood (Ore.), Chafee (R.I.), Danforth (Mo.) and Roth (Del.). House managers were expected to be selected as early as June 28. All 43 voting Republicans rejected the package, as did six Democrats: Sens. Bryan (Nev.), DeConcini (Ariz.), Johnston (La.), Lautenberg (N.J.), Nunn (Ga.) and Shelby (Ala.). Sens. Murray (D-Wash.) and Specter (R-Pa.), who are recovering from surgery, did not vote. Among a number of drug-related provisions in the budget reconciliation bill is an amendment of the 1990 Medicaid rebate law that would authorize state Medicaid agencies to establish restrictive drug formularies. Another provision amends the 1990 law's "additional" (inflation-related) rebate requirement. The law requires drug manufacturers to pay an additional rebate to states if they raise average manufacturer prices faster than inflation. The law calculated the additional rebate on a drug-by-drug basis but was scheduled to calculate the rebate on a weighted-average basis beginning in 1994. Speaking to a June 24 meeting of the National Association of Pharmaceutical Manufacturers, Senate Aging Committee aide John Coster said the Senate is deleting the switch and making permanent calculation of the rebate on a drug-by-drug basis "because of the problems associated with" calculating weighted-average manufacturer prices. The bill includes a vaccine bulk purchase provision and funds to improve vaccine administration infrastructure, Coster noted. The provision is unchanged from the measure adopted by the Senate Finance Committee one week earlier ("The Pink Sheet" June 21, p. 6). The Senate-passed legislation also excludes an extension of orphan drug R&D tax credits, although it funds FDA grants for orphan drug research. Also unchanged from the Finance Committee bill is the one-year extension of R&E tax credits and a delay in effective dates that leaves uncredited expenses for research that occurred in the period July 1, 1992-June 30, 1993. However, Sen. Feinstein (D- Calif.) successfully sponsored a resolution expressing Senate support for a permanent extension of the R&E credit. Because the House bill provides a permanent extension, the Senate resolution improves prospects for the House-Senate conference to do so. The Senate bill incorporates the Finance Committee provision that preserves but restricts Sec. 936 tax credits for U.S. companies operating subsidiaries in Puerto Rico. The legislation excluded a credit for capital gains resulting from long-term investments in startup companies. Sen. Bumpers (D-Ark.), sponsor of venture capital gains legislation, bemoaned deletion of the credit, stating that "banks in this country are not loaning money to small business," and "venture capitalists have a very difficult time trusting small business."