Medicare drug plan rapped

The authors said the plan's generosity for drug companies resembles the open-ended reimbursements that were permitted for hospitals and doctors when Medicare was established in 1965. Those reimbursements were eventually repealed, because their high cost threatened the viability of Medicare.

In this case, drug companies would win up to 40 million new customers for their products, and would still be in a position to command the high prices they enjoy today under patent-protected monopolies, the report said.

"The consequence of unrestrained prices, combined with very low additional real costs to provide the medications, means that the drug makers will take in very, very substantial and essentially unwarranted profits -- windfall profits you are not doing any work for," said Socolar, a director of the Health Reform Project at the Boston University School of Public Health.

House and Senate negotiators remained behind closed doors yesterday, trying to resolve differences in bills that would expand a Great Society program that covers 40 million elderly Americans.

Medicare now covers medications administered in the hospital or a doctor's office, but not the many medicines seniors get at drugstores and take at home.

With political pressure building to lower drug costs, President Bush this week urged Congress to stop wrangling over the issue and send him a bill he can sign.

But some senior groups have been strongly critical of the plan for a Medicare prescription benefit, saying it would not provide enough relief to seniors.

They also have pointed to the lack of price controls as a major problem -- because money taken out to pay for drugs reduces the amount available for individual benefits. The study by Socolar and Sager, codirector of the BU Health Reform Project, is a first estimate of potential industry profits.

"This is a bill that is focused on not doing things," said Sager. "It is focused on not cutting price, on not protecting people, and on not irritating the drug makers and arousing their political wrath."

A spokeswoman for the House Ways and Means Committee, whose chairman is US Representative William Thomas of California, a Republican who authored the House bill, defended the plan, saying there would indeed be savings to seniors: $18 billion of annual discounts from the retail prices that many uninsured seniors are paying now. While there is no government rate-setting, the prescription benefits would be managed by individual health plans, which would negotiate their own discounts with the drug companies.

"Seniors are the last retail payers of prescription drugs -- they don't have a drug plan," said the spokeswoman, Christin Tinsworth. "That group purchasing power is going to make a signficant difference."

US Senator Edward M. Kennedy, who has been instrumental in pushing a compromise, has said that he recognizes flaws with the bill but considered the opportunity to expand a benefit for seniors too good to pass up.

Yesterday, he released a statement through his office in response to the BU study, indicating his continued support for a Medicare drug benefit. "This study adds new fuel to the current debate. The most immediate priority is to help the elderly deal with the soaring cost of prescription drugs," he said.

Among advocates for the elderly, the BU analysis was seen as evidence that the benefits in the Medicare bill would be insufficient. They have complained that it would require steep copayments and contains coverage gaps that would leave many seniors exposed to thousands of dollars in drug bills. They also complain that the plan lacks a requirement that private employers keep seniors on their private benefit plans.

Robert Hayes, president of the Medicare Rights Center, said the plan is flawed, with a "meager" benefit, but still better than nothing. "This report very usefully puts a big exclamation point on that disgraceful part of the drug bill," he said.

At the Iowa State Council of Seniors, president Wayne Gross said it represents a giveaway to industry. "As far as we're concerned, it's a farce. It does nothing to alleviate the prescription drug probem for seniors," he said. "The only ones that are going to benefit from this drug program are going to be the drug companies and insurance companies."

Christopher Rowland can be reached at crowland@globe.com.