Latest Drugwonks' Blog
From the discussions of how American car companies are put at a disadvantage because they have to pay health insurance costs that firms in other countries avoid, it isn’t surprising that many people have concluded that health care systems in these nations are single payer. In fact, neither Germany nor Japan, two of the countries most commonly cited in this connection are government run or paid. I have already discussed Germany on several occasions, today I want to talk about Japan.
The Japanese health care system is rather complicated, with different, somewhat interlinked, plans for citizens depending on their employer and stage of life. Japan’s Employee Health Insurance Program obligates any business with 700 or more people working for it to offer health coverage to its employees. About 85 percent of companies essentially self-insure. For these companies, around 8.5 percent of payroll goes to health care and employee and employers split the cost more or less in half. Around 26 percent of people in Japan fall under this part of the system.
Companies with fewer than 700 employees participate in a federal, health insurance scheme for small businesses, run by the state. Approximately 30 percent of Japanese are in this group. Small companies pay about 8.2 percent of payroll and the state then puts in additional money.
Those who are self-employed fall under the government’s Citizens Insurance Program. It is managed by municipal rather than national authorities and is paid for by a self-employment tax, taxes on insurance companies and the government plan for small businesses, and, when necessary, direct government contributions. Those who are unemployed retain the coverage they had while working.
Finally, the health coverage for the elderly is called Roken and does not have separate financing of its own but is paid for by money from the other three parts of the system and government money. Private health insurance is possible, but rare.
In addition to taxes and the percentage of their wages they pay out for health care, people in Japan also have significant co-pays, usually around 30 percent, and other out of pocket costs for medical services. There is a ceiling on co-pays, for a middle class family, it is about $677 a month, and a normal family spends around $2,300 in a year on medical care in addition to what they pay through work. Out of pocket costs amount to about 17 percent of annual medical spending.
Japanese hospital and medical facilities are usually privately owned and operated. Small facilities tend to belong to one doctor or family, even those carrying out advanced procedures. Hospitals and doctors in private practice usually get paid a set amount for each treatment or other service and drugs also cost the same throughout the country because the prices are determined by the government.
That doesn’t mean that some people haven’t figured out ways to game this system. In some cases, doctors have bribed government officials in charge of setting fees. Doctors also benefit from ordering unnecessary tests and from seeing as many patients as they can in as little time as feasible. As a result, “two-thirds of patients spend less than 10 minutes with their doctor; 18 percent spend less than 3 minutes.”
The upside of health coverage in Japan is that it includes almost everything, sometimes reimbursement for travel expenses. Patients can go to any doctor or hospital and usually they do not need a referral or approval from a primary care physician to see a specialist. Technology is highly advanced and very accessible. And, because the cost is the same everywhere, medical facilities compete on the basis of quality or having the latest treatments. Some top hospitals do end up with queues, however, and some people pay illegally to jump to the head of the line.
Contrary to the situation elsewhere in the world, many argue that Japan needs to spend more money on health care, which consumed about 8.2 percent of GDP in 2005, less than similar systems in Europe or the US. However, the system is strapped for cash with the costs of care outstripping what is paid in. Further, people in Japan go to the doctor a lot, especially the elderly who pay less out of pocket for their care, whether for minor complaints or just to chat. This is particularly a problem because the elderly account for a staggering 90 percent of the growth in health care costs and are steadily rising in number, producing fear for the future of the system.
From an oped by Paul Duncan
"To be sure, if the same public program that competes with the private entities also gets to write and enforce the rules of the competition, that might create a problem. But almost all serious observers anticipate that the public program alternative currently being proposed will not also control the regulatory framework in which services are offered; it will simply be available as another option, and will survive only if it can succeed as a genuine alternative to those private companies. "
Read Op-Ed here.
Can we say delusional?
Let's take a look at how public plans work here and around the world. Do they compete like the postal service (oh sorry, no real competition) or do they set the prices and lowball providers and then just expand budgets in response to demand generated at taxpayer expense without regard to profitability, waste, corruption.
Does Medicaid compete? Medicare? How about the Indian Health Service?
Further, we already have public options such as Medicaid and SCHIP. What we don't have are more private choices that promote prevention and well-being and that should be the point of reform.
Making the government the lowball option is a bait and switch that will eliminate individual choices of health care plans. Why? Government's can tax and spend without the timely accountability that only a private choice based system protects.
Aetna's profits declined this year because it lowered prices to gain market share even as it spent more on medical services, disease management and prevention. Reform should encourage more of this and build on such efforts rather than kill them.
That's what is at stake. And more.
"To be sure, if the same public program that competes with the private entities also gets to write and enforce the rules of the competition, that might create a problem. But almost all serious observers anticipate that the public program alternative currently being proposed will not also control the regulatory framework in which services are offered; it will simply be available as another option, and will survive only if it can succeed as a genuine alternative to those private companies. "
Read Op-Ed here.
Can we say delusional?
Let's take a look at how public plans work here and around the world. Do they compete like the postal service (oh sorry, no real competition) or do they set the prices and lowball providers and then just expand budgets in response to demand generated at taxpayer expense without regard to profitability, waste, corruption.
Does Medicaid compete? Medicare? How about the Indian Health Service?
Further, we already have public options such as Medicaid and SCHIP. What we don't have are more private choices that promote prevention and well-being and that should be the point of reform.
Making the government the lowball option is a bait and switch that will eliminate individual choices of health care plans. Why? Government's can tax and spend without the timely accountability that only a private choice based system protects.
Aetna's profits declined this year because it lowered prices to gain market share even as it spent more on medical services, disease management and prevention. Reform should encourage more of this and build on such efforts rather than kill them.
That's what is at stake. And more.
Just returning from San Diego and the 45th annual Drug Information Association (DIA) conference where I participated on a panel about how to improve FDA communications. It was only 90 minutes long and we didn't solve all of the world's problems -- but there was some forward motion.
The panel was chaired by the always alert Julie Zawisza, CDER's Director of Communications and I was joined on the dais by Ray Kerins (Pfizer) and Steve Usdin (BioCentury).
We coverered a lot of ground, but what really was on the mind of the audience was the FDA's stance (or lack of one) on issues related to social media. We talked about DDMAC letters and the risk communications advisory committee, blogging, Facebook, Twitter -- and yes, even Cheerios. And the general consensus was that the agency was behind the curve.
I know, duh. But that's when Julie Z. stepped up to the plate with the following comment, "The FDA has no intention to stiffle the use of social media." It might have sounded like a throw-away line -- but if that sentiment is genuine (and Ms. Z, is as genuine as they come), then there's hope for FDA to be both regulator of and partner in using social media to communicate important public health information. In fact, Julie said (twice) that she was going to talk with Janet Woodcock about holding a series of external meetings on the subject of "Web 2.0."
She also, aptly, pointed out that when it comes to understanding, regulating, and using social media channels, it's important to understand that "it's not just information, but context and perspective."
You go girl.
The panel was chaired by the always alert Julie Zawisza, CDER's Director of Communications and I was joined on the dais by Ray Kerins (Pfizer) and Steve Usdin (BioCentury).
We coverered a lot of ground, but what really was on the mind of the audience was the FDA's stance (or lack of one) on issues related to social media. We talked about DDMAC letters and the risk communications advisory committee, blogging, Facebook, Twitter -- and yes, even Cheerios. And the general consensus was that the agency was behind the curve.
I know, duh. But that's when Julie Z. stepped up to the plate with the following comment, "The FDA has no intention to stiffle the use of social media." It might have sounded like a throw-away line -- but if that sentiment is genuine (and Ms. Z, is as genuine as they come), then there's hope for FDA to be both regulator of and partner in using social media to communicate important public health information. In fact, Julie said (twice) that she was going to talk with Janet Woodcock about holding a series of external meetings on the subject of "Web 2.0."
She also, aptly, pointed out that when it comes to understanding, regulating, and using social media channels, it's important to understand that "it's not just information, but context and perspective."
You go girl.
Venezuela has announced plans to invalidate the patents on a number of medicines and allow local firms to produce cheap generic copies of them, under a reform that would gut the country’s intellectual patent laws.
According to President, Hugo Chavez, “we consider that patents cannot be a restriction or a trap ... An invention or a scientific discovery should be knowledge for the world, especially medicine,” said Chavez, adding: “that a laboratory does not allow us to make a medicine because they have the patent - no, no, no.”
The proposals were announced on national television by the Minister of Trade, Eduardo Saman, who told the nation that “patents have become a barrier to production, and we cannot allow barriers to the access of medicine or transnational medicine companies to impose their rights on the Venezuelan people."
“We are revising all the doctrines and laws related to patents, which should be compatible with the international treaties that we have signed and respect and honor,” he added.
But, there’s always enough money to invest in a vast military. So much for “respect and honor.
According to President, Hugo Chavez, “we consider that patents cannot be a restriction or a trap ... An invention or a scientific discovery should be knowledge for the world, especially medicine,” said Chavez, adding: “that a laboratory does not allow us to make a medicine because they have the patent - no, no, no.”
The proposals were announced on national television by the Minister of Trade, Eduardo Saman, who told the nation that “patents have become a barrier to production, and we cannot allow barriers to the access of medicine or transnational medicine companies to impose their rights on the Venezuelan people."
“We are revising all the doctrines and laws related to patents, which should be compatible with the international treaties that we have signed and respect and honor,” he added.
But, there’s always enough money to invest in a vast military. So much for “respect and honor.
Part D, that is.
Last time the prescription drug plan for senior citizens was in the news it was being vilified by many members of the majority party. Some even saw it as an election wedge issue. And then there was the whole Non-Interference Clause thing.
And then the politios and pundits saw that Part D was a huge success with America's seniors and coming in well under budget projections. And that was the last we heard of it.
Until yesterday.
Yesterday's announcement of the $80 million deal not only put Part D back on Page One -- but also introduced a new fan -- President Barack Obama. Now, it seems, we have a President who embraces the program designed to maximize free-market public/private partnerships and provide maximum healthcare choices for program participants.
Who'd a thunk it?
This plan will also do away with the silly Catch 22 of not being able to include medicines provided via patient assistance programs (PAPs) towards spanning the infamous donut hole -- something that the Bush Administration was not able to do. It's kind of a Nixion-going-to-China thing, although I'm sure the President would wince at such a comparison.
Maybe it would be more palatable to say that, when it comes to healthcare reform ... it takes a village.
Last time the prescription drug plan for senior citizens was in the news it was being vilified by many members of the majority party. Some even saw it as an election wedge issue. And then there was the whole Non-Interference Clause thing.
And then the politios and pundits saw that Part D was a huge success with America's seniors and coming in well under budget projections. And that was the last we heard of it.
Until yesterday.
Yesterday's announcement of the $80 million deal not only put Part D back on Page One -- but also introduced a new fan -- President Barack Obama. Now, it seems, we have a President who embraces the program designed to maximize free-market public/private partnerships and provide maximum healthcare choices for program participants.
Who'd a thunk it?
This plan will also do away with the silly Catch 22 of not being able to include medicines provided via patient assistance programs (PAPs) towards spanning the infamous donut hole -- something that the Bush Administration was not able to do. It's kind of a Nixion-going-to-China thing, although I'm sure the President would wince at such a comparison.
Maybe it would be more palatable to say that, when it comes to healthcare reform ... it takes a village.
I don’t really want to rain on anyone’s public health parade, but giving the FDA the authority to “regulate” tobacco isn’t that great an idea.
Sorry. And I know how excited everyone is and everything.
FDA regulation of tobacco? Bad idea. Really.
Is cigarette smoking deleterious to America's health. Absolutely. Should Americans who currently smoke quit? Absolutely. Should the FDA regulate tobacco products? Absolutely not.
One major problem with the legislation is that it sets a very high bar (both scientific and procedural) before the FDA could approve a claim of "modified risk." The impact here would be to reduce any tobacco company's ability (or, most probably, desire) to promote their brands that are lower in nicotine content or, indeed, to even develop such products.
Or consider this, adult smoking has been declining since 1997 due to a number of things including clean air laws, media campaigns, and youth access programs. And these victories were achieved on the state level. With FDA as the nation's tobacco Tsarcoe Selo it will be difficult if not impossible (given today’s economic circumstances) to convince state legislators to continue to allocate the funds required for robust state-level tobacco control programs. After all, now it’s the FDA’s responsibility.
Can you say “FEMA?
Then, of course, there's the question of both FDA resources and expertise. Let's take the latter first. What is the current level of FDA expertise in tobacco regulation? Zero. As far as resources are concerned, the FDA's tobacco program will be funded by user fees. And, considering the current state of FDA funding and staffing, you have to ask yourself -- is that really the way we want to be going.
So, when you consider all of these issues, the answer to "Will FDA regulation of tobacco help to reduce tobacco use in America?" is very much an open one.
Sorry about that. Really sorry.
Sorry. And I know how excited everyone is and everything.
FDA regulation of tobacco? Bad idea. Really.
Is cigarette smoking deleterious to America's health. Absolutely. Should Americans who currently smoke quit? Absolutely. Should the FDA regulate tobacco products? Absolutely not.
One major problem with the legislation is that it sets a very high bar (both scientific and procedural) before the FDA could approve a claim of "modified risk." The impact here would be to reduce any tobacco company's ability (or, most probably, desire) to promote their brands that are lower in nicotine content or, indeed, to even develop such products.
Or consider this, adult smoking has been declining since 1997 due to a number of things including clean air laws, media campaigns, and youth access programs. And these victories were achieved on the state level. With FDA as the nation's tobacco Tsarcoe Selo it will be difficult if not impossible (given today’s economic circumstances) to convince state legislators to continue to allocate the funds required for robust state-level tobacco control programs. After all, now it’s the FDA’s responsibility.
Can you say “FEMA?
Then, of course, there's the question of both FDA resources and expertise. Let's take the latter first. What is the current level of FDA expertise in tobacco regulation? Zero. As far as resources are concerned, the FDA's tobacco program will be funded by user fees. And, considering the current state of FDA funding and staffing, you have to ask yourself -- is that really the way we want to be going.
So, when you consider all of these issues, the answer to "Will FDA regulation of tobacco help to reduce tobacco use in America?" is very much an open one.
Sorry about that. Really sorry.
Many Americans’ idea of health care in Europe looks something like Norway. Its health system even has the imprimatur of Michael Moore, who says that although he filmed there as part of his movie Sicko, it did not end up in the final film lest it be found too unbelievable for American viewers.
The first thing is that health care in Norway isn’t cheap. Norway spends 8.7 percent of its GDP on health care, less than most of its European neighbors, but this is misleading because with outlays of $4,520 per capita, Norway was the most expensive in Europe on this measure, and the priciest in the OECD other than the US. This cost is funded by central government tax revenues, additional taxes charged by the municipalities, and some out of pocket costs to patients.
Contrary to popular belief, the government doesn’t carry out all of the day to day operation of the health care system. Rather, Norway has significant decentralization in providing care. Five regional health authorities oversee access to specialists, while primary care falls under local authorities and these authorities have considerable latitude in their operations.
General policy, reimbursement rates, and the annual budget are, however, still set on the federal level. Many doctors and health care workers are paid salaries by the state rather than being reimbursed for the care they provide and
The upside of the Norwegian system is that anyone who is a legal resident can participate in the government system. They are entitled to all “necessary health care,” often defined quite inclusively, and neither doctors nor health care officials can deny treatments that fall under this for any reason, even if it creates a financial strain on the system. Some patients are even entitled to spa treatments, paid for by the state.
But while being in the hospital costs Norwegians nothing, health care there is not totally free at the point of service. For services not fully covered, patients are charged copays up to an annual individual total, about 1615 kronor in 2006. As an example, a visit to a GP costs about 125 to 235 kronor. Children are not charged copays for all or some medical services, depending on age. Those who are retired or disabled are also exempted.
Once a person (or one parent plus children under 16) has reached this threshold, they get a special card and their care is then gratis for the rest of the year. Over 1 million Norwegians reached this point in 2005. For care in areas outside the health system, such as dental and rehabilitation or treatment outside Norway, there is a separate threshold of 2500 kronor, which works the same way.
Other costs to patients come from copays for medications, plus having to pay the difference if a patient wants a pricier drug than the system will reimburse for. Overall, around 15 percent of health care spending is out of pocket.
The other side of such generosity is that Norway is among the nations whose residents must contend with extensive waits for health care services and rationing of care. This means that it is common for Norwegians to go to other countries to receive care faster than at home. Norway has also fallen prey to the lure of cost-effectiveness, which often comes into conflict with the wide right of Norwegians to “necessary health care.”
People in Norway also have only a limited ability to decide which doctor they want to go to since only those listed with the government are acceptable and specialists can only be seen with a referral from the general practitioner. Norwegians can choose their hospital but cannot demand procedures that are not authorized by the doctor.
Despite the huge government system in Norway, those who prefer private care can spend their own money to get it. However, private facilities are relatively few and generally located in urban areas. Most Norwegians go private only for “substance abuse treatment, rehabilitation and dental care,” as well as many laboratory tests and scans. Pharmacies are also primarily private. Care outside the government system also is significantly more expensive and generally private policies are purchased to supplement public coverage, not replace it.
I recently participated in the 9th France/USA AGIPHARM Conference. This year’s event was held in
* Edouard Croufer (Director, Healthcare & Chemical Practice, Arthur D. Little), declared that the pharmaceutical industry needed a new model – that Pharma needs to move from “find a molecule and market it” to “identify a need and find a solution.” When I pointed out to him that the latter was precisely what the industry is currently doing, he … agreed! Nothing like having the strength of yor convictions. As Henri Poincaré said, “To doubt everything, or, to believe everything, are two equally convenient solutions; both dispense with the necessity of reflection." Croufer also pointed out that 21st success for medicines would be realized through “speed and intensity.” Amen.
* Francois Meyer (Director, Haute Autorité De Santé) made a rather revolutionary statement for the head of a national reimbursement authority when he stated that “we must move beyond clinical trials” to make true 21st century healthcare technology assessments. He also spoke to the need to include outcomes data in reimbursement decisions – or rather in the revisiting of already-decided reimbursement decisions. Or as he put it, “comparative efficacy in real life.” Heady stuff.
* Relative to the development of public/private partnerships, Patrice Jaillon (President of GIP CENGEPS – the
* All well and good until Noel Renaudin (President of the CEM – the comité économique du medicament), the Grand Fromage of healthcare reimbursement in
Particle accelerators are, after all, about high-speed collisions.
Did you ever think you would see this come to pass...
Officials said Saturday that the White House, lawmakers and the pharmaceutical industry had struck a deal to have drug companies pay $80 billion to help narrow a gap in coverage in the prescription drug program for Medicare. The officials said that the agreement would have drug companies pay part of the cost of brand name drugs for lower and middle-income older people in the "doughnut hole." That term refers to a feature of the current drug program that requires beneficiaries to pay the entire cost of prescriptions after initial coverage is exhausted but before catastrophic coverage begins.
Obama seized on the deal as evidence that his efforts are gaining momentum.
"Key sectors of the health care industry acknowledge what American families and businesses already know — that the status quo is no longer sustainable," the president said, and noted: "We are at a turning point in America's journey toward health care reform."
So drug and biotech companies are finally being permitted what they wanted to do all along but were banned from doing -- giving seniors a discount to give them a seamless drug benefit. That makes sense since the decision about what drug to take should be what works, not the price or cost. At least that is what the evidence says. And making that decision on clinical evidence leads to value based benefit designs which focus on overall health outcomes...
All to the good. And the rationale, in part, to Medicare Advantage pay more for prescription drugs.
But what is Obama proposing to fill the nearly $2 trillion gap to shove 25 million people into public health plans.
"Obama has proposed cuts in Medicare spending on hospitals, prescription drugs and other services, but a political consensus is far from certain."
He has proposed eliminating Medicare advantage, which has primarliy benefited the chronically ill and minorities... Leaving them with what?
So just as the private sector provides seniors with a solution that moves us towards a preventive approach to health care Obama is pillaging the one part of Medicare that provides just that to prop up a health plan that cannot even support paying for preventive care....
The cynicism is breathtaking and the mainstream media is too busy fawning to take note. Real health care reform is within reach but not the way the President wants to take us...
Read article here.
My sources tell me the prime movers of this deal were Abbott, Pfizer, Merck, Amgen, and AstraZeneca.
Here's the story, courtesy of Politico:
Drug firms reach $80 billion deal

Giving a boost to health legislation after a bruising week, pharmaceutical companies have offered Congress and the White House an $80 billion commitment over 10 years to help pay for comprehensive reform, negotiators told POLITICO on Saturday. 

The promised savings from the industry are to be written into the new law, making them binding. The deal is to be announced soon by President Barack Obama or the Senate Finance Committee. 

Obama was relying on drug-makers to help finance his $1 trillion health care overhaul.
The deal provides a lift to the administration’s efforts to regain momentum in the debate after a tough week in which congressional budget analysts returned eye-popping cost estimates on proposed bills, and even some Democrats dug in their heels against the high costs. 

“You’ve got your first passengers on the train and now you can start moving forward down the track,” said an industry source close to the negotiations. 

The offer was approved on a conference call Friday afternoon by the governance committee of the Pharmaceutical Research and Manufacturers of America, which represents top drug and biotechnology companies. 


Afterward, PhRMA President and CEO Billy Tauzin called Senate Finance Committee Chairman Max Baucus (D-Mont.). The White House was then notified. PhRMA’s board had discussed the parameters of the deal during a board meeting in Washington on Thursday. 

House and Senate Democrats have increasingly raised the idea of using the health-care bill as a vehicle to begin narrowing the so-called "doughnut hole" — a coverage gap in the Medicare Part D plan that forces seniors to pay out of pocket for some of their drugs, above a certain cost. 

Three senators called on Baucus this week to address this gap in the Senate reform package, and House committee chairmen agreed Friday to deal with it in their legislation. 

Under the deal, a senior who makes $80,000 to $85,000 will effectively have their out-of-pocket costs cut in half, an industry official said.


The two main prongs of the agreement among PhRMA, congressional leaders and the White House: 

— Drug companies will provide a 50 percent discount to most beneficiaries on brand-name medicines covered by a patient’s Part D plan when purchased in the coverage gap. 

—The entire negotiated price of the Part D covered medicine purchased in the coverage gap would count toward the beneficiary’s out-of-pocket costs. That would lower the beneficiary’s total out-of-pocket spending. The proposal would not require any additional paperwork on the part of the beneficiary nor would an asset test be used for eligibility. 

Most plans in the Medicare drug program, which began in 2006, included a gap in coverage. The cost of drugs are covered until the beneficiary and the government had spent $2,250. At that point, individuals have to pay 100 percent of the costs until reaching $5,100 for the year, and then the government coverage kicks in again. That gap between $2,250 and $5,100 is often referred to as "the doughnut hole." 


The agreement couldn’t come at a better time for Obama and Baucus. It blunts charges that Democrats aren't concerned about the cost of the overhaul. And with this deal, they are showing that the industry remains at the table, and willing to deal. This could put pressure on other industries to deal as well. 

PhRMA has been negotiating the deal for months with Baucus and his staff, and with Nancy-Ann DeParle, director of the White House Office of Health Reform.
“This is a huge amount of money,” said an industry official. “Our CEOs tossed and turned in their beds for a long time before signing off on this. It’s going to provide a significant amount of money toward achieving health-care reform.” 

The official added: “We recognize that there has to be a shared sacrifice if we’re going to extend health-care coverage to everybody in America.” 

Obama hinted at the negotiations in his radio and Web address last week, when he outlined about $75 billion in savings that could come from lower payments for prescription drugs – money that could be used to pay for his $1 trillion health care overhaul. White House budget director Peter Orszag told reporters at the time that the administration was “in discussions with stakeholders over the best way of achieving that $75 billion.” 


But even the $80 billion is just one part of a massive health-reform tab that the Congressional Budget Office said this week is likely to cost more than $1 trillion – a number that many Republicans and even some Democrats say is too much. Obama has announced a package of tax increases, cuts in hospital and other reimbursements and other savings that he says add up to $950 billion to pay for a health overhaul, but Congress has balked at some of his proposals and it’s not yet clear if others would achieve all the savings he hopes.
Here's the story, courtesy of Politico:
Drug firms reach $80 billion deal

By: Carrie Budoff Brown and Mike Allen 

Giving a boost to health legislation after a bruising week, pharmaceutical companies have offered Congress and the White House an $80 billion commitment over 10 years to help pay for comprehensive reform, negotiators told POLITICO on Saturday. 

The promised savings from the industry are to be written into the new law, making them binding. The deal is to be announced soon by President Barack Obama or the Senate Finance Committee. 

Obama was relying on drug-makers to help finance his $1 trillion health care overhaul. The deal provides a lift to the administration’s efforts to regain momentum in the debate after a tough week in which congressional budget analysts returned eye-popping cost estimates on proposed bills, and even some Democrats dug in their heels against the high costs. 

“You’ve got your first passengers on the train and now you can start moving forward down the track,” said an industry source close to the negotiations. 

The offer was approved on a conference call Friday afternoon by the governance committee of the Pharmaceutical Research and Manufacturers of America, which represents top drug and biotechnology companies. 


Afterward, PhRMA President and CEO Billy Tauzin called Senate Finance Committee Chairman Max Baucus (D-Mont.). The White House was then notified. PhRMA’s board had discussed the parameters of the deal during a board meeting in Washington on Thursday. 

House and Senate Democrats have increasingly raised the idea of using the health-care bill as a vehicle to begin narrowing the so-called "doughnut hole" — a coverage gap in the Medicare Part D plan that forces seniors to pay out of pocket for some of their drugs, above a certain cost. 

Three senators called on Baucus this week to address this gap in the Senate reform package, and House committee chairmen agreed Friday to deal with it in their legislation. 

Under the deal, a senior who makes $80,000 to $85,000 will effectively have their out-of-pocket costs cut in half, an industry official said.


The two main prongs of the agreement among PhRMA, congressional leaders and the White House: 

— Drug companies will provide a 50 percent discount to most beneficiaries on brand-name medicines covered by a patient’s Part D plan when purchased in the coverage gap. 

—The entire negotiated price of the Part D covered medicine purchased in the coverage gap would count toward the beneficiary’s out-of-pocket costs. That would lower the beneficiary’s total out-of-pocket spending. The proposal would not require any additional paperwork on the part of the beneficiary nor would an asset test be used for eligibility. 

Most plans in the Medicare drug program, which began in 2006, included a gap in coverage. The cost of drugs are covered until the beneficiary and the government had spent $2,250. At that point, individuals have to pay 100 percent of the costs until reaching $5,100 for the year, and then the government coverage kicks in again. That gap between $2,250 and $5,100 is often referred to as "the doughnut hole." 


The agreement couldn’t come at a better time for Obama and Baucus. It blunts charges that Democrats aren't concerned about the cost of the overhaul. And with this deal, they are showing that the industry remains at the table, and willing to deal. This could put pressure on other industries to deal as well. 

PhRMA has been negotiating the deal for months with Baucus and his staff, and with Nancy-Ann DeParle, director of the White House Office of Health Reform.
“This is a huge amount of money,” said an industry official. “Our CEOs tossed and turned in their beds for a long time before signing off on this. It’s going to provide a significant amount of money toward achieving health-care reform.” 

The official added: “We recognize that there has to be a shared sacrifice if we’re going to extend health-care coverage to everybody in America.” 

Obama hinted at the negotiations in his radio and Web address last week, when he outlined about $75 billion in savings that could come from lower payments for prescription drugs – money that could be used to pay for his $1 trillion health care overhaul. White House budget director Peter Orszag told reporters at the time that the administration was “in discussions with stakeholders over the best way of achieving that $75 billion.” 


But even the $80 billion is just one part of a massive health-reform tab that the Congressional Budget Office said this week is likely to cost more than $1 trillion – a number that many Republicans and even some Democrats say is too much. Obama has announced a package of tax increases, cuts in hospital and other reimbursements and other savings that he says add up to $950 billion to pay for a health overhaul, but Congress has balked at some of his proposals and it’s not yet clear if others would achieve all the savings he hopes.
Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.
