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Drug Companies Try to Hijack $4 Billion, Reduce Medicare Discounts

— October 1, 2018

Drug Companies Try to Hijack $4 Billion, Reduce Medicare Discounts

A measure that the Pharmaceutical Research and Manufacturers of America (PhRMA) organization has referred to as a “technical correction” to a bipartisan budget law signed by President Donald Trump in February of this year is the center of a heated debate.  The law brought into effect a few months ago will require drug manufacturers to provide greater discounts to those on Medicare whose spending on prescriptions falls within the “doughnut hole,” or coverage gap, in order to reduce out of pocket costs.  The discount is set to rise from 50 percent on brand-name drugs to 70 percent next year.  Now, pharmaceutical companies are attempting to take hold of $4 billion from the federal Treasury to fund bailouts.

Many Democrats and consumer advocacy groups are strongly opposing these efforts.  Henry Connelly, a spokesperson for House Democratic Leader Nancy Pelosi, called it a “Republican attempt to hijack a bipartisan effort on opioids funding to ram through a multibillion-dollar handout to Big Pharma.”

“Big Pharma is trying to hijack the bill and turn it into a giant pharmaceutical company bailout,” Senator Tina Smith, Democrat of Minnesota, added.

Drug Companies Try to Hijack $4 Billion, Reduce Medicare Discounts
Photo by Louis Reed on Unsplash

The proposal “will increase prescription drug costs for older Americans while providing a windfall of billions of dollars to the drug industry,” said the AARP.  The group’s vice president Nancy LeaMond said, “AARP strongly opposes…attempts to cut a backroom deal with Congress and reverse the Medicare Part D doughnut hole improvements enacted earlier this year that put drugmakers on the hook for a higher share of Medicare drug costs.”

The Congressional Budget Office initially projected the requirement for drug companies to provide larger discounts would reduce federal spending on Medicare’s drug benefit by $7.7 billion through 2027.  However, right after the law was enacted, the office raised its estimate of the savings to $11.8 billion.  Drug companies are arguing that Congress intended to save just $7.7 billion and should now give back the difference.

Medicare beneficiaries could still receive discounts of 63 percent if the money is “refunded,” according to manufacturers.  However, Senator Ron Wyden of Oregon, the senior Democrat on the Finance Committee, said the cost of relieving pharmaceutical companies would be double that to prevent and treat opioid addiction and President Trump has repeatedly stated drug companies are “getting away with murder.”

Medicare’s outpatient drug benefit, Part D, is offered by private companies such as UnitedHealth and CVS Health.  Prescription drug insurance plans are responsible for part of the costs associated with the coverage gap.  In February’s Bipartisan Budget Act, Congress reduced the insurers’ share from 20 percent to 5 percent.  Of course, the drug companies are arguing that insurers should be required to pay more so they can pay less.

“We are focused on ensuring Medicare Part D is secure for the future by correcting a technical error,” said Stephen J. Ubl, the president and chief executive of PhRMA.

Mark E. Miller, the former executive director of a federal commission that advises Congress on Medicare, said, “In the context of the current debate, I would not roll back the drug discounts.  We need broader changes in the structure of Medicare’s drug benefit.  If the discounts are rolled back, patients and taxpayers should get something in return, to bring more competition to the market and drive down drug prices.”

Congress has been considering several proposals to speed the approval of generic versions of brand-name medications in order to reduce costs.  Allowing generic drugs to enter the market sooner could save money for Medicare, Medicaid, and other federal health programs.


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