Administration lauds Medicare drug discounts and wants more, more, more

The Obama administration is waving a banner about the benefits of Medicare drug discounts, saying they have saved U.S. recipients $8.9 billion so far in prescription drug costs. Of course, the more they save, the less drugmakers earn, since they are the ones having to pony up the discounts, which the Obama administration is looking to make even larger.

The Centers for Medicare and Medicaid Services (CMS) said in a statement today that in the first 10 months of 2013, nearly 3.4 million people nationwide who reached the coverage gap known as the "donut hole" have saved $2.9 billion, an average of $866 per person. That is higher than last year when 2.8 million seniors saved $1.8 billion, an average of $677 per Medicare beneficiary. The gap is the portion that Medicare enrollees have to pay out of pocket after initial costs are covered and before catastrophic coverage takes over drug expenses. The nearly $9 billion figure was the savings since the program was first implemented, an average of $1,209 per person.

When pharma made its healthcare-reform deal with the White House and Congress, the industry agreed to offer discounts that would close the infamous Part D hole by 2020. But in his proposed budget this year, the president recommended bumping up pharma's discounts to 75% from 50% in 2015. Meanwhile, Part B drug reimbursements would be cut to the average sales price plus 3%. Currently, the reimbursement rate is ASP plus 6%.

On top of that, his budget calls for a ban on payments from branded drugmakers to generics makers as part of a settlement that sets the date for a generics launch, often called pay-to-delay. But it didn't stop there. It suggests cutting biologics exclusivity to 7 years from the previously agreed-upon 12 years.

Needless to say, the industry, which grudgingly agreed to the discounts in the first place, thinks the new proposals are way out of bounds. The industry lobbying group PhRMA called the budget "bad for patients, bad for innovation and bad for the economy." It warned if the provision makes it into law, cancer clinics would stop taking Medicare patients, tens of thousands of "high value" jobs in the biopharma sector could be lost, and R&D investment would slow down. The budget proposal will get hashed out in the upcoming budget negotiations. Critics of the Obama plan point to a survey that shows that 90% of Medicare beneficiaries are satisfied with Medicare as is.

- here's the announcement