The Drug Company Relief Act

Knight-Ridder (02.02.06):

"The new Medicare drug benefit will give drug companies up to $2 billion in extra profits this year because they're no longer required to pay rebates on drugs bought by the government for the elderly poor. The boost in profits comes from a shift in the drug coverage of 6.4 million poor and elderly people from Medicaid to the new Medicare drug benefit." Windfall for drug industry raises questions

"Unlike Medicaid, which requires drug companies to charge their lowest or 'best price' for medications, the Medicare program relies on competition among private drug plans to keep prices low." "By eliminating the need to discount drugs for the government, the industry can now pocket the savings. "'The net effect over 10 years is probably closer to $40 billion in extra profit,' said Stephen Schondelmeyer, a pharmaceutical economics professor at the University of Minnesota." Not true, says Medicare and Medicaid Services Administrator Mark McClellan. "'The drug plans are negotiating aggressive discounts and rebates that are being passed along to beneficiaries and taxpayers.'" Is true, says Steve, who "doesn't envision the Medicare program getting better prices than Medicaid at any point in the future because dozens of private plans won't have as much negotiating clout as a government-run program." "'The argument that more plans will be more competitive doesn't appear to be true. More players doesn't result in lower prices if they have much smaller volumes and much less leverage.'" Tony Butler "agreed with the report that Medicare would probably have higher drug prices than Medicaid." He estimated the additional profit would be in the neighborhood of $1.8 billion to $2 billion. Tony has a little insight into the issue. He is "the co-head of global pharmaceuticals and managing director at Lehman Brothers, [and] earned M.S. and Ph.D. degrees in molecular biology from the University of Tennessee." Tony also said that "profits would likely increase in coming years as more businesses cut retirees' drug benefits and steer their former employees into the Medicare drug plans." You don't think businesses would do that, would you? Oh and by the way, Mark finally got around to admitting that "the Medicare prescription program was too complicated for many of its intended beneficiaries to understand and said simplifying it was a top priority." "McClellan's comments may be the first sign that the administration recognizes that the complex program may have to be retooled to succeed." Then again, it may not.