Medicare Prescription Drug Benefit Uncertain

Send this article to a friend.

Printer friendly version.

Medicare Prescription Drug Benefit Uncertain

The lack of a Medicare prescription drug benefit is a major election-year issue. House Speaker Dennis Hastert (R-IL) is expected to introduce a much broader prescription drug plan than he has backed in the past. He proposes spending $300 billion over 10 years for drug benefits, the same amount Democrats wanted to budget last year. Last year Republicans only wanted to spend half that much.

But while both parties in Congress are anxious to give voters something, many privately wonder how the government is going to pay for it. With federal coffers reduced, the debate will focus not only on creating the prescription benefit, but also on ways to cut drug costs-methods that are expected to include pressuring manufacturers to lower their prices and making sure that cheaper generic versions of drugs become available more quickly.

As drug prices continue to spiral upward states and insurance companies are increasingly using lists of preferred medications or "formularies." Expensive medications that are not on the list require prior authorization before the drugs can be prescribed. If permission is not granted doctors must prescribe cheaper medicines such as generics. In Maine, savings from one such controversial program are running 50% above projections. The program resulted in a savings of $15 million in 2001, rather than the $10 million the department had anticipated.

When anthrax attacks rocketed demand for the antibiotic Cipro, its sole supplier, Bayer agreed to sell the government 100 million doses at a 46% discount, but only after Health and Human Services Secretary Tommy Thompson threatened to ask Congress for authority to override Bayer's patent.

In 1997, Bayer persuaded generic drug maker Barr Laboratories to drop a legal challenge to Bayer's patent on Cipro by agreeing to pay Barr about $28 million a year until the patent expires in 2003. The practice is relatively common and one that drug companies use to prolong patents and the guaranteed profits from monopoly drugs. Congress may move to end such anti-competitive practices.

EDITOR'S NOTE: As this goes out, GOP leadership in the House is still trying to figure out how to package a Medicare prescription drug benefit. Part of the problem-even $300 billion may not be enough to make premiums and deductibles affordable for most seniors. Some estimate that it may take more than twice that amount.

Source: "States, Insurers Cut Drug Costs With Generics," Jed Seltzer, Reuters, December 24, 2001. "Drug Plan Savings Beat Projections," The Associated Press, January 8, 2002. "Cipro Saga Exposes How Drug Makers Protect Profits," USA Today, October 29, 2001.

March 2002