KHN Morning Briefing

Summaries of health policy coverage from major news organizations

Obama To Formally Announce Medicare Drug Cuts Today

The pharmaceutical industry agreed Saturday to reduce Medicare drug costs as part of health overhaul in an apparent effort to stave off potentially more-burdensome givebacks under the Democrats' health-overhaul plan. Today, President Barack Obama will make a formal announcement about the deal.

The Wall Street Journal reports: "Drug makers on Saturday outlined a proposal to forgo $80 billion in revenue over a decade, largely by covering more of the cost of brand-name prescription drugs under the federal government program for seniors. It would make up part of the $313 billion in government health-spending cuts that President Barack Obama has proposed over a decade to help pay for the overhaul plan. ... The agreement is the latest in a series of cost-cutting deals the government has made with insurance companies, doctors, hospitals and medical-device manufacturers as it seeks to find ways to pay for proposed changes to the health-care system, including expanding insurance coverage to 46 million uninsured Americans."

The deal seeks to help seniors who fall in Medicare's "doughnut hole." The Wall Street Journal reports: "Under the pharmaceutical deal, drug companies would pay half of the cost of a prescription when it isn't covered under a gap in the Medicare Part D prescription benefit. In the current system, Medicare beneficiaries are responsible for paying drugs' full price once they exceed $2,700 and up to $6,154 per year."

The Journal also reports that "Drug companies have been raising the prices of many drugs this year in advance of the expected health-system changes, analysts say. Pharmaceutical companies say the increases are fair and necessary as drugs mature, but analysts say the companies are trying to eke out as much revenue from the treatments as they can before patents expire and health-care changes drive down prices" (Adamy and Rockoff, 6/22).

The Associated Press/Wall Street Journal reports on how the deal marked a major triumph for Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, as well as the Obama administration. The AP reports that President Barack Obama said: "The agreement by pharmaceutical companies to contribute to the health reform effort comes on the heels of the landmark pledge many health industry leaders made to me last month, when they offered to do their part to reduce health spending $2 trillion over the next decade. We are at a turning point in America's journey toward health care reform."

The AP reports: "Sen. Baucus's announcement said drug companies would pay half of the cost of brand-name drugs for 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. Other officials said wealthier Medicare beneficiaries would not receive the same break, but there was no mention of that in the statement. 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."

"While none of the changes in the prescription drug program would directly lower government costs, several officials also said the industry agreed to 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" (6/21).

The Washington Post reports that "Barry Rand, chief executive of AARP, will join President Obama at the White House to announce the endorsement of an organization that boasts 40 million highly engaged, politically active members. The unusual offer by the Pharmaceutical Research and Manufacturers of America (PhRMA) is part of its effort to convince skeptical lawmakers that it backs major health care legislation. Though the agreement represents a fraction of the total cost of health-care reform, it has been managed for maximum public relations exposure" (Connolly, 6/22).

Meanwhile, the Washington Post's Daily Dose notes: "The pharmaceutical industry is aggressively lobbying for a comprehensive health bill that would lock in insurance coverage for up to 50 million new customers. The real question however is whether the Senate Finance Committee will be able to reach consensus this week on a bill that costs no more than $1 trillion over the next decade, guarantees basic health coverage to the majority of Americans and raises the quality of care nationwide. Several senators hit the Sunday talk show circuit to deliberate whether to include a new government-run insurance program in reform legislation" (Connolly, 6/22).

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