US drugmakers offer huge boost to Obama

Bloomberg

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U.S. drugmakers agreed to spend as much as $80 billion over 10 years to make it easier for elderly Americans to afford medicine, a move President Barack Obama hailed as "a turning point" in his effort to overhaul the nation’s health-care system.

The arrangement, negotiated over months with U.S. Senator Max Baucus, chairman of the Finance Committee, with the participation of the Obama administration, shrinks the so-called doughnut hole in Medicare’s prescription-drug program. The companies will discount as much as 50 percent of the cost of brand-name medicines, according to PhRMA, the industry trade group that represents such drugmakers as Pfizer and Eli Lilly.

"We are at a turning point in America’s journey toward health-care reform," Obama said in a statement. "Key sectors of the health-care industry acknowledge what American families and businesses already know - that the status quo is no longer sustainable."

Still, the question of how to pay for the country’s biggest expansion in health-care coverage in more than four decades looms large in Congress. The announcement of an accord late Saturday capped a week in which Republicans challenged the price tag of Obama’s plans. The U.S. Chamber of Commerce, the largest business group, began a campaign against proposals being considering in Congress, including a requirement that employers provide health insurance to their workers.

Campaign promises
Congress is working against an October deadline that Obama, a Democrat, set for signing the legislation into law. As a presidential candidate he pledged to expand coverage to the 46 million people who lack health insurance while lowering the cost of a system of care that makes up 17 percent of the economy. Last week, the Congressional Budget Office estimated that a version of an overhaul being considered by Baucus’s panel would cost at least $1.6 trillion. Baucus, a Montana Democrat, put off releasing a draft of his legislation while his panel looked for more savings.

"This has been a bad week, and we wanted to show the administration and the American people that we were doing everything we can to help get comprehensive health reform," said Ken Johnson, senior vice president at PhRMA, in a telephone interview. The $80 billion represents "the limit of what we’re willing to pay for" over 10 years to extend discounts to the elderly.

PhRMA, short for the Pharmaceutical Research and Manufacturers of America, was one of six groups in the health-care industry that pledged May 11 at the White House to help reduce U.S. medical spending by $2 trillion over a decade.

Under Medicare’s prescription drug benefit program, known as Part D, patients buy medicines through conventional or mail-order pharmacies. They pay the first $295 of costs, then the plan covers 75 percent of purchases until the total reaches $2,700, according to Medicare’s explanation of the program.

Patients must then pay all their costs until spending $4,350 out pocket under the ’doughnut hole.’ Thereafter, they make a small co-payment for each drug until the end of the year. Insurance firms sell plans providing the drug benefit.

Many people stop taking their medicines when they enter the coverage gap, Johnson said. Drug companies, among them Merck, often have assistance programs.

"With this new proposal we will go the extra step and offer direct savings to Medicare Part D beneficiaries in the coverage gap regardless of their income," said Richard T. Clark, the chairman and chief executive officer of Merck, in a statement.

Obama argues that his plan is aimed at curtailing health-care costs, which PricewaterhouseCoopers said in a report last week will rise 9 percent next year. Health care’s share of the nation’s economy may double to 34 percent by 2040 if nothing is done to change the current system, the White House Council of Economic Advisers said June 2.

AARP, the Washington-based advocacy group for Americans 50 and older, praised Saturday’s accord. "We look forward to studying the details of this agreement, and we will work with the administration, Congress and other stakeholders to enact comprehensive health care reform this year," said Nancy LeaMond, AARP executive vice president, in a statement.