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Drug firms agree to improve benefits for seniors

Senator Max Baucus announced a deal with the pharmaceutical industry regarded as key to a national healthcare plan. Senator Max Baucus announced a deal with the pharmaceutical industry regarded as key to a national healthcare plan. (Evan Vucci/ Associated Press/ File)
By David Espo
Associated Press / June 21, 2009
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WASHINGTON - The pharmaceutical industry agreed yesterday to spend $80 billion over the next decade to improve drug benefits for seniors on Medicare and to defray the cost of President Obama’s healthcare legislation, capping secretive negotiations involving key lawmakers and the White House.

“This new coverage means affordable prices on prescription drugs when Medicare benefits don’t cover the cost of prescriptions,’’ Senator Max Baucus, chairman of the Senate Finance Committee, said in a statement announcing the accord.

The deal marked a major triumph for Baucus, as well as the administration. Obama praised the deal.

“The agreement by pharmaceutical companies to contribute to the health reform effort comes on the heels of the landmark pledge many health industry leaders made to me last month, when they offered to do their part to reduce health spending $2 trillion over the next decade,’’ Obama said. “We are at a turning point in America’s journey toward healthcare reform.’’

Baucus, a Montana Democrat, has been negotiating with numerous industry groups for weeks as he tries to draft legislation that meets Obama’s goal of vastly expanding health coverage, has bipartisan support, and does not add to the deficit.

Baucus’s announcement said drug companies would pay half of the cost of brand-name drugs for seniors in the so-called doughnut hole, a gap in coverage that is a feature of many of the plans providing prescription coverage under Medicare.

In addition, the entire cost of the drug would count toward a patient’s out-of-pocket costs, meaning that their insurance coverage would cover more of their expenses than otherwise.

While none of the changes in the prescription drug program would directly reduce government costs, several officials said the industry agreed to measures that would give the Treasury more money under federal health programs. In particular, officials said drug companies would probably pay higher rebates for certain drugs under Medicaid, the program that provides healthcare for the poor. Those funds would be used to help pay for legislation expanding health insurance for millions who now lack it.

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