Drugmakers Agree To Lower Drug Prices for Medicare Beneficiaries

Last week, drugmakers agreed to provide $80 billion to reduce drug costs for Medicare beneficiaries, the Washington Post reports.

According to an anonymous source, the voluntary move by the industry would be part of major reform legislation and would reduce federal spending on drugs during the next 10 years (Connolly, Washington Post, 6/20).

Under the agreement 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 Medicare's so-called "doughnut hole" 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 (Espo, AP/San Diego Union-Tribune, 6/20).

The Post reports that the agreement would aid about 3.4 million elderly or disabled U.S. residents who currently fall into the coverage gap (Washington Post, 6/20).
Other Agreements

Although the changes would not lower government costs directly, the industry also agreed to other measures that could produce more money for federal health programs.

For example, industry officials said drug companies would probably end up offering higher rebates for certain drugs under Medicaid, which would produce more savings for health overhaul efforts (AP/San Diego Union-Tribune, 6/20).

The Post reports that the drugmakers, in agreeing to the plan, might have preemptively tried to avoid more severe cuts by the government.

Industry sources said the White House originally asked drugmakers for $100 billion in savings (Washington Post, 6/20).

Comments

President Obama called the gap in Medicare coverage "a continuing injustice that has placed a great burden on many seniors" (Haberkorn, Washington Times, 6/21). He continued, "This deal will provide significant relief from that burden for millions of American seniors" (Youngman, The Hill, 6/20).

According to Obama, the agreement is another victory following the pledge by pharmaceutical companies last month to help reduce health spending by $2 trillion over the next 10 years (Parsons, Chicago Tribune, 6/10). Obama said the agreement is "an important part" of reform legislation he expects to sign in October (Pelofsky, Reuters, 6/20).

Ken Johnson, senior vice president for PhRMA, said, "We recognize there has to be a shared sacrifice if we're going to extend high-quality, affordable health care coverage to everyone in America" (Adamy/Rockoff, Wall Street Journal, 6/22).