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Medicare Drug Program News
Medicare Plan Prices of 10 Top Brand-Name Drugs
Increased 6.8% Just Since December
Possible $17 billion in unanticipated prescription
drugs costs for beneficiaries and taxpayers
May 14, 2007 - Prices under Medicare prescription
drug plans for 10 of the most prescribed brand-name medications have
increased 6.8% since December 2006, while wholesale prices for the same
drugs have increased 3%, according to a
House Oversight and Government
Reform Committee report, the
Washington Post reports. Previously, Medicare
actuaries had projected that drug prices would increase by 7% over the
entire year.
According to the report, insurance companies that
offer Medicare drug plans likely will negotiate rebates from
pharmaceutical companies that amount to 4.6% of total drug costs this
year, compared with 5.2% last year.
Medicare actuaries previously had estimated
insurers in 2007 would obtain rebates of 6%. According to the Post, a
reduction in discounts from 6% to 4.6% over 10 years would result in
about $17 billion in unanticipated prescription drugs costs for
beneficiaries and taxpayers, with all of the additional money going to
drug companies.
In addition, committee investigators found that
premiums for Medicare drug plans have increased by 13% since the
prescription drug program went into effect last year. According to the
Post,
the impact of the data on seniors is "not completely clear" because most
who have enrolled in the program have selected plans with low
deductibles, so they would not "see the full impact of drug price
increases" until they hit the plan's coverage gap.
Committee investigators said they chose to track
the 10 selected brand-name drugs because those drugs were top sellers in
2004 and because all but one had no generic alternatives. They add that
cost increases among brand-name drugs are so high that they will not be
made up by generic savings.
Response
Drug manufacturers and health insurers have
contested the data, saying that the committee is highlighting certain
brand-name drugs to exaggerate cost increases. They contend that generic
drugs have lowered overall costs and that competition has restrained
premium increases.
Karen Ignagni, president of
America's Health Insurance Plans,
said, "You have to look at the broader trends. And the news has been
nothing but positive, exceeding all expectations."
Ken Johnson, senior vice president of the
Pharmaceutical Research and
Manufacturers of America, said, "The bottom line is that the
Medicare prescription drug program is saving money for seniors and
disabled persons, as well as for taxpayers."
Marilyn Moon, director of the health program at the
American Institutes for Research
and a former trustee for Medicare and Social Security, said, "When you
introduce a new program, with all of the fanfare, everyone is anxious to
get the best prices, the best look and demonstrate the private sector
can handle it. But over time, when you've gotten your customers lined
up, prices tend to slip upward."
Robert Reischauer, president of the
Urban Institute, said,
"It's far too soon to make a definitive judgment" based on the new
report, but it might be enough to "raise some red flags."
Implications
The prescription drug program's costs to date have
remained well below initial projections, the Post reports. However,
according to committee investigators, in its first year, the program's
greatest cost savings stemmed from lower-than-expected enrollments --
particularly among low-income seniors -- and from insurers pushing
seniors to take generic alternatives.
Because so many beneficiaries enrolled in the
program have been switched to generics and those cost savings now have
been realized, continuing cost containment will rely on holding down
prescription drug prices.
Investigators say that goal might be difficult to
achieve, according to the
Post.
Committee Chair Henry Waxman (D-Calif.) will hold
hearings on drug price increases under Medicare and likely will
reintroduce legislation that would grant the federal government the
authority to negotiate drug prices for Medicare, the
Post
reports (Weisman,
Washington Post,
5/13).
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