Obama tackles Medicare’s prescription doughnut hole

President Obama today made official an $80 billion deal with the pharmaceutical industry to cut prescription drug costs for the nation’s seniors.

As it is, Medicare patients are forced to pay the full cost for their prescription drugs when annual expenses fall between $2,700 and $6,154. Under the new agreement, drug companies would pick up 50 percent of the tab for some of those patients falling into Medicare’s so-called doughnut hole.

“This gap in coverage has been placing a crushing burden on many older Americans who live on fixed incomes and can’t afford thousands of dollars in out-of-pocket expenses,” Obama said today, with key Democratic lawmakers and the head of AARP by his side.

Our goal, our imperative, is to reduce the punishing inflation in health care costs while improving patient care. And to do that, we’re going to have to work together to root out waste and inefficiencies that may pad the bottom line of the insurance industry, but add nothing to the health of our nation. To that end, the pharmaceutical industry has committed to reduce its draw on the health care system by $80 billion over the next 10 years as part of overall health care reform.

For the industry, it’s not quite the sacrifice it appears to be. Big Pharma has already profited handsomely from the creation of the prescription drug program. And, as The Hill’s Jeffrey Young points out today, their $80 billion commitment could pay dividends in the end.

Drug makers may be seen as forfeiting $80 billion but the reality is not so simple. Many seniors who would avail themselves of half-price medicines would simply have done without in the absence of discounts.

Indeed, the Kaiser Family Foundation reported last year that about 3.4 million Medicare beneficiaries hit the doughnut hole in 2007, of which roughly 15 percent stopped taking their medicines as a result.

“Moreover,” Young adds, “PhRMA’s collaboration with [Senate Finance Committee Chairman Max Baucus (D-Mont.)] also could shield them from legislative proposals that would cut deeper into their revenue.”

Colorado note: Yes, that’s the same PhRMA that sponsored the controversial ad touting Gov. Bill Ritter and nine other states’ chief executives for their support of the biotech sector. Lest you think they only dabble in federal politics.

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Mike Lillis

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