Deal With Drugmakers Prompts Questions About Federal Savings
The pharmaceutical industry's pledge to reduce drug spending by $80 billion would lower Medicare prescription drug beneficiaries' out-of-pocket costs during the plan's so-called "doughnut hole" coverage gap, but it is not clear how much money the plan would allow the federal government to put aside for overhauling the health care system, the New York Times reports (Pear, New York Times, 6/23).
Under the agreement released over the weekend by the Pharmaceutical Research and Manufacturers of America board and Senate Finance Committee Chair Max Baucus (D-Mont.), drug companies will pay as much as half of the cost of brand-name drugs for low- and middle-income beneficiaries who fall into the coverage gap.
The agreement also states that the entire cost of a drug would count toward a beneficiary's out-of-pocket costs during the coverage gap. According to officials, Medicare patients with incomes up to about $80,000 or $85,000 would get at least some benefit from the agreement (California Healthline, 6/22).
President Obama said, "This is a significant breakthrough on the road to health care reform, one that will make the difference in the lives of many older Americans." He added, "To those who -- here in Washington -- who've grown accustomed to sky-is-falling prognoses and the certainties that we cannot get this done, I have to repeat and revive an old saying we had from the campaign: 'Yes, we can.'"
Obama said, "We are going to get this done" (Fletcher/Connolly, Washington Post, 6/22). He urged other industry players to strike similar deals with the White House and Congress (Budoff Brown, Politico, 6/23).
AARP CEO Barry Rand, who appeared with Obama at the White House, said, "Too many Americans fall into this coverage gap, and they stop taking their medication, because they really simply can't afford it," but "today, now, they will have a new opportunity to lead a healthier life" (Pulizzi, Wall Street Journal, 6/22).
Under the deal, Medicare Part D discounts will make up about $30 billion in spending reductions for individuals and cannot be counted as savings accumulated to fund an overhaul, while the other $50 billion in savings would come from other provisions to be included in a health reform bill, according to an Obama administration aide (Politico, 6/23).
According to CQ HealthBeat, "it is unclear how [the $80 billion] number is derived," as well as "what policies the agreement might cover beyond discounts for seniors" (Wayne, CQ Today, 6/22).
However, PhRMA Senior Vice President Ken Johnson said the $80 billion commitment would include "significant scorable savings to the government" (New York Times, 6/23).
Effect on Prospects
The drug industry's offer was "made in the context of comprehensive health care reform being enacted," because PhRMA understands that "there has to be a shared commitment if this is going to happen and this is our part of it," according to Johnson.
However, it is not known how the deal will affect the likelihood of health reform legislation being passed this year, which Baucus and Obama have said will not add to the national deficit (Espo, AP/San Diego Union-Tribune, 6/22).
CQ Today reports that the deal could help win support for health reform from seniors who are concerned that the plan could cut Medicare benefits (CQ Today, 6/22).
In addition, the deal helps prospects for reform by making "it more difficult for groups" such as the drug industry "to back away as the process moves forward, even as [Obama] demands sacrifices from the constituencies affected," according to The Hill.
However, the deal likely would cause many seniors who may have stopped filling prescriptions during the doughnut hole to begin doing so, meaning more business for PhRMA's members (Young, The Hill, 6/22).
Sen. Olympia Snowe (R-Maine) said, "The savings offered here appear to be more than offset by new drug sales."
Obama said, "Drug and insurance companies stand to benefit when tens of millions more Americans have coverage," so "we're asking them, in exchange, to make essential concessions to reform the system and help reduce costs."
Johnson said, "The president has asked all of us to make a shared sacrifice, and this is our part. The payoff at the end of the day is better patient care" (Wolf, USA Today, 6/22).
In addition, the group's work alongside Baucus could "shield them from legislative proposals that would cut deeper into their revenue," The Hill reports (The Hill, 6/22).
Several members of the Senate Finance Committee have proposed cutting Medicare reimbursements to drug companies (CQ HealthBeat, 6/22).
The industry for years has fought proposals to allow Medicare to negotiate lower prices for the Medicare drug benefit and to reimport U.S.-made drugs from foreign countries such as Canada (AP/San Diego Union-Tribune, 6/22).The pledge also could help the industry by "casting drug companies in a positive light" as action on reform legislation approaches, CQ HealthBeat reports (CQ HealthBeat, 6/22). This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.