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Friday, February 03, 2006

Medicare Part D: The Gift to Pharma that just keeps giving

Kevin Drum directs us to this article:

Windfall for drug industry raises questions
By Tony Pugh Knight Ridder Newspapers

WASHINGTON - The new Medicare drug benefit will give drug companies up to $2 billion in extra profits this year because they're no longer required to pay rebates on drugs bought by the government for the elderly poor...

The boost in profits comes from a shift in the drug coverage of 6.4 million poor and elderly people from Medicaid to the new Medicare drug benefit. Unlike Medicaid, which requires drug companies to charge their lowest or "best price" for medications, the Medicare program relies on competition among private drug plans to keep prices low. By eliminating the need to discount drugs for the government, the industry can now pocket the savings.

"The net effect over 10 years is probably closer to $40 billion in extra profit," said Stephen Schondelmeyer, a pharmaceutical economics professor at the University of Minnesota.

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