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Medicare recipients may get help from drug industry

It says it will help senior citizens with 'doughnut hole' gap

THE ASSOCIATED PRESS

Published: June 21, 2009

WASHINGTON

The pharmaceutical industry agreed yesterday to spend $80 billion over the next 10 years improving drug benefits for seniors on Medicare and defraying the cost of President Obama's health-care legislation, capping secretive negotiations involving key congressmen and the White House.

"This new coverage means affordable prices on prescription drugs when Medicare benefits don't cover the cost of prescriptions," Sen. Max Baucus, the chairman of the Senate Finance Committee, said in a statement announcing the agreement.

The deal marked a major triumph for Baucus as well as the administration. Obama praised the deal.

"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," Obama said. "We are at a turning point in America's journey toward health-care reform."

Baucus, a Montana Democrat, 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.

Baucus' announcement said that 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 that wealthier Medicare beneficiaries would not get 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 that their insurance coverage would cover more of their expenses than otherwise.

Billy Tauzin, the president and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA), said, "Millions of uninsured and financially struggling Americans are depending on us to accomplish comprehensive health-care reform this year. Today, America's pharmaceutical research and biotechnology companies are signaling their strong support for these critically important efforts."

Although none of the changes in the prescription-drug program would directly lower government costs, several officials also said that the industry agreed to measures that would give the Treasury more money under federal health programs. In particular, officials said that drug companies would likely wind up paying 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 that the deal was agreed to late Friday night when Tauzin called Baucus. The senator's statement said that the White House was involved in the agreement.

It was not clear what leverage the agreement would give Baucus with other health-care providers with whom he is in negotiations.

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