Following the old admonition that, "if you don't have anything nice to say, don't say anything at all"...we'll start with the obvious truth.  We're glad the drug industry appears willing to take steps to reduce the outrageous coverage gap created when Medicare Part D was passed in 2003.   The so-called "doughnut hole" has trapped millions of seniors each year in a coverage limbo, where they pay full premiums but receive no prescription drug coverage. It's a provision created by those who wanted to give drug makers and private insurers access to the senior market through the privatization of Medicare...without bearing the cost of full coverage.   PhRMA's promise to spend about $30 billion over ten years to offer discounted coverage (for brand-name drugs only) to seniors in the doughnut hole is certainly a good start.  However, this proposal does not eliminate the doughnut hole as we have advocated.  There are also few details about where the remaining $50 billion in savings promised by PhRMA will come from.  But some analysts predict, wherever they come from, it's an investment that should pay off for drug makers:
"'Apparently industry feels these concessions are manageable and will allow them to maintain credibility with Congress and the White House while preserving, and potentially expanding, the number of prescriptions written,' said a market report by Washington Analysis distributed Monday. Wall Street analysts described the $80 billion giveback as a "good deal" for pharmaceutical companies, which they said would be more than offset by gains from selling more drugs to more insured. Many analysts estimate expanded insurance coverage could increase yearly drug sales in the U.S. by $9 billion to $12 billion, or 3% to 4% of annual sales."          Wall Street Journal, June 23
We believe there are a number of questions that must be answered as Congress considers this PhRMA offer as part of the larger healthcare reform debate: 
  • Will there be statutory language providing HHS enough leverage to enforce the discounts with pharmaceutical manufacturers? 
  • Will audits be sufficient to ensure that prices are not manipulated? (The drug industry has a history of gaming of the Average Wholesale Price which is used for reimbursement under Medicaid and Medicare.) What other safeguards will be provided in addition to audits?  
  • Will seniors benefit from the bulk of these promised savings? 
  • What cost savings will the federal government see and how will that impact Medicare?
Seniors need real relief from the Part D doughnut hole.  We hope this is the first step toward getting there.