Pharmaceutical Industry Agrees to $80 Billion Deal Improving Drug Benefits for Seniors on Medicare

Strategic Insights -

The pharmaceutical industry agreed to spend $80 billion over the next decade to improve drug benefits for seniors on Medicare and defray the cost of President Obama's health care legislation. The deal marked a significant triumph for Sen. Max Baucus, chairman of the Senate Finance Committee, who has been negotiating with industry groups for weeks to draft legislation that meets Obama's goal of expanding health coverage with bipartisan support and no addition to the deficit. The agreement also sparked a boost for the drive to enact health care legislation, which had been facing significant challenges.

Key Takeaways:

  • The pharmaceutical industry agreed to spend $80 billion over the next decade to improve drug benefits for seniors on Medicare.
  • The deal includes spending $40 billion on the cost of brand-name drugs for seniors in the "doughnut hole," a gap in coverage that is a feature of many Medicare plans.
  • Patients will benefit from having the entire cost of the drug count toward their out-of-pocket costs, meaning their insurance coverage will cover more of their expenses than otherwise.
  • Wealthier Medicare beneficiaries will not receive the same break, but the details of the agreement did not mention this explicitly.
  • The industry agreed to measures that will give the Treasury more money under federal health programs, including higher rebates for certain drugs under Medicaid.
  • The deal was agreed to on Friday night when Billy Tauzin, president and CEO of PhRMA, called Sen. Max Baucus.
  • The agreement was announced by the White House and involved Sen. Baucus and other key lawmakers.

Statistics:

  • $80 billion: The amount the pharmaceutical industry has agreed to spend over the next decade to improve drug benefits for seniors on Medicare.
  • $40 billion: The amount spent on the cost of brand-name drugs for seniors in the "doughnut hole."
  • 10 years: The timespan over which the $80 billion will be spent.
  • 500,000: The estimated number of seniors who will benefit from the agreement, according to Sen. Baucus.
  • 2010: The year in which the agreement was announced.

Sources:

  • DAVID ESPO, THE ASSOCIATED PRESS WASHINGTON -- The pharmaceutical industry agreed Saturday to spend $80 billion over the next decade improving drug benefits for seniors on Medicare and defraying the cost of President Obama's health care legislation
  • Statement by Sen. Max Baucus (no date)
  • Statement by Billy Tauzin, president and CEO of PhRMA (no date)
  • Congressional Budget Office estimates (no date)
  • *** (SIDEBAR) Key points of deal Under the agreement announced Saturday (no date)