Thread: Drug companies may narrow Medicare gap UPDATED

Drug companies may narrow Medicare gap

WASHINGTON (AP) — The pharmaceutical industry agreed Saturday to spend $80 billion over the next decade improving drug benefits for seniors on Medicare and defraying the cost of President Obama's health care legislation, capping secretive negotiations with the White House and key lawmakers.

The deal, expected to be announced later in the day, marked a major triumph for Sen. Max Baucus, D-Mont., as well as the administration. The chairman of the Senate Finance Committee has been negotiating with numerous industry groups for weeks as he tries to draft legislation that meets Obama's goal of vastly expanding health coverage, has bipartisan support and does not add to the deficit.

Under the deal, which several officials confirmed, drug companies would pay as much as half of the cost of brand-name drugs for lower and middle-income seniors in the so-called doughnut hole — a gap in coverage that is a feature of many of the plans providing prescription coverage under Medicare.

In addition, the entire cost of the drug would count toward a patient's out-of-pocket costs, meaning their insurance coverage would cover more of their expenses than otherwise.

Officials said Medicare patients with incomes up to about $80,000 or $85,000 would realize some benefit.

While none of the changes in the prescription drug program would directly lower government costs, the industry also agreed to additional measures that would give the Treasury more money under federal health programs. In particular, officials said drug companies would likely wind up paying pay higher rebates for certain drugs under Medicaid, the program that provides health care for the poor.

Those funds would be used to help pay for legislation expanding health insurance for millions who now lack it.

One official said the deal was agreed to late Friday night when Billy Tauzin, head of the Pharmaceutical Research and Manufacturers of America (PhRMA), called Baucus.

It was not clear what impact, if any, the agreement would have on other health care providers who are in negotiations with Baucus.

But at a minimum, the agreement serves as an effective counter to impression that the drive to enact health care legislation was sputtering.

Ken Johnson, senior vice president of the Pharmaceutical Research and Manufacturers of America, or PhRMA, said Friday night, "We remain committed to comprehensive health care reform and we are still in discussions with the administration and congressional leaders about ways we can make a positive contribution to this important effort."

The disclosure of negotiations came near the end of an up-and-down week for the administration and its allies on health care.

Congressional Budget Office estimates showed early versions of two major Senate bills were either too costly or failed to make a large enough dent in the ranks of the uninsured. Republicans seized on the reports as evidence that Democrats were losing traction.

They leapt again when it was disclosed that House Democrats were considering a wide array of tax increases to finance their legislation, including an income tax surcharge, a tax on employers based on the size of their payroll and a value-added tax, a form of a national sales tax.

House Democrats on Friday unveiled draft legislation they said would cover virtually all of the nation's nearly 50 million uninsured but it came without a price tag or an indication of how it would be paid for.

Major provisions of the 850-page measure would impose new responsibilities on individuals to obtain coverage and on employers to provided it. It also would end insurance company practices that deny coverage to the sick and create a new government-sponsored plan to compete with private companies.

Speaker Nancy Pelosi has said she hopes the legislation can clear the House before lawmakers leave for their annual August vacation.

http://www.usatoday.com/news/washington ... care_N.htm

Deal to cut drugs costs could be boon for industry

By Richard Wolf, USA TODAY

WASHINGTON — A deal between drugmakers and lawmakers to cut prescription costs for hard-pressed Medicare recipients also could boost drug industry profits and help Congress pay to overhaul the nation's health care system.

President Obama and AARP, the nation's largest seniors' group, on Monday endorsed the deal worked out over the weekend between the drug industry and Senate Democrats. It would give the Senate Finance Committee $80 billion over 10 years from the drug industry to use in its health care overhaul bill, which could be unveiled later this week.

Medicare recipients would get $30 billion in discounts to halve their brand-name prescription-drug costs when they are inside the program's coverage gap, known as the "doughnut hole."

For 2009, the gap begins when their total annual drug costs have reached $2,700 and continues until they have spent $4,350 of their own money. During that period, participants pay the full amount for their drugs.

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For the government, about $50 billion could be applied to any health care overhaul, says White House Office of Health Reform spokeswoman Linda Douglass. Senate Finance Committee Chairman Max Baucus, D-Mont., who negotiated the deal, hasn't said how the $50 billion would be saved or used.

For the drug industry, its $80 billion investment could help advance the fledgling health care overhaul. If it passes, many of the 46 million people now without insurance could become new customers. If Congress doesn't pass a health care bill, seniors won't get the relief, says Ken Johnson of Pharmaceutical Research and Manufacturers of America, the industry trade group.

"Drug and insurance companies stand to benefit when tens of millions more Americans have coverage," Obama said Monday. "So we're asking them, in exchange, to make essential concessions to reform the system and help reduce costs."

A study last year by the Kaiser Family Foundation found that about 3.4 million people reached the coverage gap. About 15% stopped taking their medicines, and 5% switched drugs.

"Too many Americans who fall into the coverage gap stop taking their medications because they simply cannot afford them," said AARP CEO Barry Rand. "They will now have a new opportunity to lead a healthier life."

The pharmaceutical industry's offer to split the cost for drugs inside the coverage gap would mark the biggest change in the law since it was passed in 2003 and implemented in 2006. It's part of a less detailed pledge by health industry leaders to reduce costs by $2 trillion over 10 years.

"The president has asked all of us to make a shared sacrifice, and this is our part," Johnson said. "The payoff at the end of the day is better patient care."

Some lawmakers and health care advocates such as the National Committee to Preserve Social Security and Medicare said the deal doesn't go far enough and is inferior to a House Democratic bill that would eliminate the coverage gap over 15 years. They said more than $220 billion a year is spent on prescriptions in the U.S., a figure that will rise if more people have insurance.

"The savings offered here appear to be more than offset by new drug sales," said Sen. Olympia Snowe, R-Maine, a moderate whose vote is being sought by Democrats.

http://www.usatoday.com/news/washington ... rugs_N.htm