Who says that arm-twisting doesn’t work? The pharmaceutical industry has agreed to help close the donut hole in Medicare drug coverage — reducing drug costs for seniors by $80 billion over the next decade and paying for part of Obama’s healthcare reform legislation. Specifically, seniors will get a 50% discount for drugs in the donut hole. (See Obama’s comments on the agreement here).
I guess the industry will do anything to avoid price controls (a bad idea, by the way), which could really hit where it hurts. (Incidentally, the industry is likely to offset the discount by raising prices elsewhere, as well as from prescriptions written to newly insured patients).
Although most of the details haven’t been worked out yet, and it is difficult to know how exactly the program will be implemented, this seems like a good deal for the industry. Eight billion dollars per year is a relatively small fraction of total pharmaceutical revenues in the U.S. ($315 billion in 2007). But it’s a good political move, likely to improve the industry’s public image while helping millions of seniors in need.
So everybody is happy, but I think the cost of drugs is one of the less critical issues in healthcare today. More judicious use of drugs (i.e. less reliance on drugs and more on lifestyle changes) is where the real cost reductions should come from.
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