Pharma gears up for fight against Medicare drug cuts

Another budget discussion, another threat of Medicare Part D cuts. With President Obama's budget proposals set for unveiling on Wednesday, word is that the so-called dual eligibles would fall under Medicaid drug-pricing rules, cutting pharma's Medicare revenues.

The president hinted at Part D cuts in this year's State of the Union address, saying the U.S. should "reduce taxpayer subsidies to prescription drug companies." Industry groups, namely PhRMA, have been girding for the battle.

So far, there's no specific indication that the president advocates opening Medicare drug prices up to negotiation. A recent report pegged the possible savings from that approach at $541 billion over the next 10 years. "This fix alone would go far towards hitting anyone's deficit target," the Center for Economic and Policy Research's Dean Baker said (as quoted by PharmaTimes).

No need to say that price negotiation is anathema to the pharma industry. Drugmakers have to negotiate pricing in other markets, and they don't want to face it with Medicare. The dual-eligibles idea isn't as far-reaching; it would extend Medicaid-style rebates to Medicare beneficiaries who also qualify for Medicaid. Before Part D came into being, that's exactly how things worked.

It's a change that's been proposed repeatedly over the past several years and has always been beaten down. It could fail again this time; after all, the industry has teamed up with a host of organizations to fight it. But with some $400 billion in proposed healthcare-program cuts, pharma may have to share the pain.

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