Drug firms oppose Medicare discounts

February 1, 1999

Pharmaceutical Representative

The pharmaceutical industry sharply criticized new legislation that proposes offering Medicare beneficiaries deep pricing discounts on prescription medicines.

The pharmaceutical industry sharply criticized new legislation that proposes offering Medicare beneficiaries deep pricing discounts on prescription medicines.

Currently, Medicare does not provide prescription drug coverage.

Rep. Tom Allen (D-ME) introduced The Prescription Drug Fairness for Seniors Act in late September, just as the 105th Congress was coming to its scheduled close. The bill proposes including senior citizens in the Federal Supply Schedule, which would entitle Medicare beneficiaries to receive the same discounted prices that the pharmaceutical industry offers other preferred customers, such as federal agencies and managed care organizations.

Citing a House Government Reform and Oversight Committee report, Allen said that "a senior paying for his or her own prescription drugs must pay, on average, over twice as much for the drugs as the drug companies' favored customers." The costs, he continued, "are particularly difficult for seniors, who constitute 12% of the population but purchase one-third of all prescriptions."

Allen's legislation, if approved, would entitle seniors to use their Medicare drug benefit card to purchase prescription medicines at reduced prices from participating pharmacies. The pharmacies would have agreements with the Department of Health and Human Services that would allow them to purchase medicines at discounted prices - savings they could then pass on to seniors.

The Pharmaceutical Research and Manufacturers of America immediately attacked the legislation. Offering substantial discounts - as much as 40% by some accounts - to such a high-volume population would hurt senior citizens and all Americans in the long run because it would handicap pharmaceutical companies' research and development efforts, PhRMA said.

According to the Wall Street Journal, the number of people who presently benefit from the Federal Supply Schedule equals roughly 9 million. If Allen's bill passes and Medicare beneficiaries were included in the schedule, that number could grow to 48 million.

An underlying concern driving the bill is HCFA's projection that prescription drug costs will account for more than 8% of total health care costs by 2007. An aging America, increasingly dependent on Medicare, may be concerned with its ability to pay that 8%.

Rep. Pete Stark (D-CA), another congressman eager to debate prescription drug coverage for seniors, said: "For many beneficiaries with modest incomes, no retiree health coverage and too many assets to qualify for Medicaid, these economic trends mean they will be forced to rely on traditional Medicare with no drug coverage. In effect, we are creating a large underinsured class of Medicare beneficiaries."

Legislators will likely be lobbied by industry and public advocacy groups as they adjourn during the winter months. After weighing the pros and cons of Allen's bill and other bills addressing Medicare pharmacy benefits, they will convene for debate in the 106th Congress. PR

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