Medicare Part D Was A ‘Windfall’ For Pharma
10 CommentsBy Ed Silverman // July 24th, 2008 // 6:27 pm
Drugmakers received a $3.7 billion “windfall” during the first two years of Medicare’s prescription drug coverage, according to a report from the Democratic staff of the House Oversight and Government Reform Committee. Please look here for the report and here for the testimony.
The report focused on so-called dual eligibles, or patients who qualify for prescription drug coverage from both Medicaid, which covers the poor, and Medicare, the health insurance plan for the elderly and disabled. In 2006, six million eligible beneficiaries were shifted from Medicaid to Medicare’s Part D prescription drug coverage, at a cost increase to taxpayers of 30 percent, according to the report.
“The drug manufacturers have been paid billions more for the drugs used by the dual eligible beneficiaries than they would have been paid if the dual eligibles had continued to receive their drug coverage through Medicaid,” Henry Waxman, a California Democrat and chairman of the committee, said at a hearing today, according to Reuters.
Nine drugs each generated over $100 million more in revenues under the Medicare Part D program than they would have generated had Medicare Part D insurers been able to get the same discounts that Medicaid gets. For these nine drugs, the manufacturers charged the private Medicare Part D insurers 46% more than they charged Medicaid, according to the report.
Examples cited: Johnson & Johnson made over $500 million in additional revenues from sales of its Risperdal antipsychotic through Medicare, and Bristol-Myers Squibb made an additional $200 million from its Plavix blood clotter.
The Republican committee members released their own report, arguing that reducing costs in Medicare Part D would only increase costs to other payers in the system, such as private employers and unions, Reuters writes. In addition, the Part D program is operating below expected budget projections, said Rep. Tom Davis of Virginia, the committee’s highest ranking Republican.
“Repeatedly making economically implausible arguments about the efficiency of government-run drug pricing, or plucking artificial windfalls from thin air, won’t make Part D, a good program, work any better,” Davis said, according to Reuters. Republicans also noted an 85 percent satisfaction rate among seniors with Medicare Part D as another measure of the program’s success.
“The success to date of the Medicare prescription drug benefit provides strong evidence that competition among private plans has contributed significantly to lowering both government and beneficiary costs compared to what was originally estimated,” Kerry Weems, acting administrator of the Centers for Medicare and Medicaid Services, told the committee. Many beneficiaries “are experiencing added value through their Part D coverage in the form of effective, safety-promoting medication management programs.”
Paul G
But thousands of patients got medicines that they otherwise wouldn’t have had. And they got them at a reasonable negotiated price.
Everybody wins, why not?
pharma pr hack
Paul,
Missed it completely- by allowing dual eligibles to be shifted to the Medicare Part D- taxpayers, you and me paid 30 percent more for drugs than we would have for people who were already getting drugs on Medicaid.
Medicaid by law, and they really mean it in Alabama, hence the lawsuits, gets a much lower price for drugs than the private plans do through part D.
All those drugs would have already been paid for — the difference is how much is paid for them.
That 30% markup is someplace else the federal government added to the debt just to give insurance plans and pharma a bone. Doesn’t really sound like a winner at all.
Sam
See http://www.psychdrugdangers.com/US/MedicaidPsychDrugPayments.html for a listing of what we, the U.S. taxpayers, have forked over for psychiatric drugs under Medicaid since 1991. A 30% increase in spending in Medicare Part D pushes the total to well over $100 Billion, a close to 5,000% increase in spending (Medicaid and Medicare Part D for those that switched over) since 1991.
Atlex
Hack,
You always seem to miss the point–in this case many points. First, Medicaid programs have become exceedingly restrictive. In many states, the list of drugs on the state PDLs don’t meet the needs of seniors. In other states, they limit the number of prescriptions to 2 or 4 or 5–again not meeting the needs of seniors. In both of these cases, beneficiaries have no choice to change plans–there is only one Medicaid program per state. Of course, in Part D, duals can change plans every month in order to meet their needs. Another important point is that without the duals, who have high utilization of medication, the 20M non-duals who enrolled in Part D would have likely received lower rebates (if economists are to be believed), a fact that the majority report didn’t take into account when it looks at costs. I could go on and on…but it really boils down to this: do you prefer to have a free market system where satisfaction rates for duals are in the high 80s and they get the medicines they need, or do you prefer a government run program, with restrictions on access. Sure, a government run program can get a lower cost by setting prices, but as the economist who testified at the hearing discussed, that would simply raise prices on other customers.
Atlex
pharma PR hack
Atlex, you are missing the point as always–
Medicaid isn’t made to be a government program to produce satisfaction or to buttress the free market system.
MEDICAID is a safety net to provide medications/care for those who qualify and have no other alternative because it is a safety net it doesn’t have, nor should it a full formulary but a rigid control system to maximize efficiency. For every dollar paid for a brand med when a generic will do is a dollar that is not providing care for another individual. It isn’t a lifestyle or a satisfaction deal. MEDICAID is an acknowledgement of the need for government to help take of our neediest. But government has limited funds and there are lots of needs.
MEDICAID is not meant to function as a substitute for an HMO. It is not a government insurance program.
Atlex
Hack,
Let me get this straight…seniors and the disabled don’t have the right to the medicines they need to treat there illnesses. That’s essentially what you’ve said. It’s not about brand vs. generic. Remember, the Part D program probably has the highest generic use rate of any broadscale drug plan. In fact, that’s one of the reasons that the brand drugs in Part D cost more than in Medicaid and one of the big fallacies of the majority’s report. If a Part D plan is successful in shifting usage over to generics, brand manufacturers won’t offer as large a rebate. That’s one of the reasons that Part D is coming in substantially under budget, while seemingly being unable to extract as great as Medicaid. An individual script for Crestor or Nexium may cost more in Medicare rather than Medicaid, Part D plans have done a better job of appropriately shifting beneficiaries to generics. If the beneficiary and his/her physician believe that a brand drug would work better, there are processes to overcome the plan’s formulary. More importantly, if this makes a beneficiary unhappy, they can change plans.
Atlex
harpy
I, for one, am shocked that Medicare part D has led to windfall profits for pharmaceutical companies! This program was designed by Billy Tauzin himself to benefit the great number of poor people who need medications! Why ol’ Billy is even now working for those poor companies - I mean people - defending their rights…and…what? He’s working for whom? oh, um, I see…yes, well, um…good job, Billy. Youv’e done your corporate masters proud!
harpy
Ah yes, good ol’ Billy boy was well rewarded for his work as the “architect” of Part D. His corporate masters must be very pleased.
Laurie
“seniors and the disabled don’t have the right to the medicines they need to treat there illnesses”
Where did anyone say that? The argument is that those that used to be recieving their drugs via the cheaper, more controlled, Medicaid program, are now using the less controlled, more expensive Medicare D program.
Both plans cover their drugs, the discussion is who profits when that switch is made.
Atlex
Laurie,
You obviously haven’t seen the PDL and other restrictions put in place by some states. In many states, duals would be unable to get more than 4 scripts per month (while in general they average 8 to 10). In other states, access to pain meds is highly restricted. The Medicaid program in many states is simply not suitable for vulnerable seniors (the sickest and oldest). The Part D program has far more flexibility in meeting these needs.
Atlex