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Medicare Part D a Boon for Drug Companies, House Report Says
By Nicole Gaouette, Los Angeles Times
July 25, 2008
U.S. drug manufacturers are reaping a windfall from taxpayers because Medicare's privately administered prescription drug benefit program pays more than other government programs for the same medicines, a House committee charged in a report Thursday.
The House Committee on Oversight and Government Reform found that taxpayers are paying up to 30% more for prescription drugs under Medicare's privatized Part D program for seniors and the disabled than under the government's Medicaid program for the poor.
"Medicare Part D has given the major drug companies a taxpayer-funded windfall worth billions of dollars," said committee Chairman Henry A. Waxman (D-Beverly Hills).
Waxman said he would introduce legislation to guarantee that federal taxpayers would not be charged higher prices under Medicare Part D than under Medicaid.
"This is an enormous giveaway. And it has absolutely no justification," he said.
Under Medicaid, drug companies have to sell prescription drugs to the government at discounted prices. When Medicare Part D was enacted in January 2006, drug companies were no longer obliged to cut rates for their products.
In the two years Medicare Part D has been in effect, drug manufacturers have taken in $3.7 billion more than they would have through prices under the Medicaid program, committee investigators found.
"The drug companies are making the same drugs. They are being used by the same beneficiaries. Yet because the drugs are being bought through Medicare Part D instead of Medicaid, the prices paid by the taxpayers have ballooned by billions of dollars," Waxman said.
He said Bristol-Myers made an additional $400 million from higher prices for a single drug, the stroke medication Plavix.
The committee's report and a hearing on Thursday echoed the battle over a Medicare bill last week. That debate centered, in part, on privatization of the Medicare system, which many Republicans support and many Democrats oppose.
The privatization of programs such as Medicare has emerged as an issue in the presidential campaign, with Republican candidate John McCain calling for a change in the way Social Security is funded.
Congress last week overwhelmingly overrode President Bush's veto of the Medicare bill, which will take funds from private insurers that run Medicare Advantage plans to reimburse doctors who see Medicare patients.
On Thursday, the ranking Republican on the oversight committee, Rep. Thomas M. Davis III of Virginia, said that the cost of Medicare Part D had come in nearly 40% lower than original estimates and that seniors using the program were satisfied.
"More economically disadvantaged seniors have access to the drugs their doctors prescribe than ever before in American history," Davis said in a statement. "They've learned to love Part D."
A report by the committee’s Republican staff said Democrats were asking the wrong questions about Medicare Part D. Federal price controls for Medicaid result in prices below those available in the free market, but the difference does not amount to a "windfall" for drug companies, Republicans said.
Richard Smith, a vice president with the Pharmaceutical Research and Manufacturers of America, the leading drug industry group, warned in a statement to the committee against government interference in Medicare Part D.
"It is primarily the effective operation of the competitive market that has driven down Part D costs for beneficiaries and taxpayers compared to previous estimates," Smith said.
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