Medicare reform–2003:
Supposedly, reform of the Medicare system, passed by both houses, reduces the cost of drugs and new medicines.

George W. Bush,

“Seniors have waited too long for more choices and better benefits, including prescription drug coverage, similar to the kind now enjoyed by federal employees and members of the Congress…I will continue working closely with Congress during conference to make improvements and pass meaningful Medicare reform.”

So, your “reform” is why people are unable to get their rx’s and many have ended up in the hospital? And how many members of Congress have been forced to sign up for Medicare D? How many members of Congress and federal employees have had to be hospitalized, as they were unable to get rx’s or treatment?

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Henry Waxman’s letter requesting an investigation:

…members heard testimony from an expert on drug pricing who revealed that the January 1 transfer of drug coverage for dual-eligible beneficiaries from Medicaid to Medicare, which the Republican Congress mandated, will likely result in a multi-billion dollar windfall for drug manufacturers. I am requesting that GAO investigate this issue.

The drug company windfall involves the 6.4 million seniors and people with disabilities who were switched automatically from the Medicaid drug benefit to the new Medicare drug benefit on January 1. This transfer is enriching the pharmaceutical industry because drug prices under the new Medicare drug benefit appear to be significantly higher than the prices previously paid by Medicaid. The policy change is likely to provide tens of billions of dollars in new profits for the drug companies, virtually all of which will come out of the pockets of U.S. taxpayers.

…the transfer to Medicare Part D has caused enormous disruptions for seniors, causing many to be unable to get drugs that they were previously receiving through Medicaid. It appears that the only party benefiting in this arrangement are the drug companies that give millions to the Republican leaders who drafted the legislation.

…it also appears to have resulted in a large increase in the prices paid for the drugs.  

…the drug manufacturers who sell to these plans are no longer bound by the Medicaid “best price” provisions. They are also no longer bound by the requirements that price increases not exceed the inflation rate. The result is that the dozens of private drug plans are unable to obtain prices that are as low as the prices paid by the federal and state governments under the Medicaid plan…

The net result is a multi-billion dollar windfall for the drug manufacturers. According to the Congressional Budget Office, over the next ten years the federal government share of drug costs for the 6.4 million dual-eligible beneficiaries will be an average of approximately $2,500 per beneficiary per year, which is equivalent to $160 billion over the decade…

…it is the federal taxpayer who will pay most of the drug industry windfall.


Specifics of rx industry windfall profits:

Medicare D will directly cause an increase in profits, as the rx industries do not have to pay rebates on the rx’s that are sold to the poor.Medicaid to the new Medicare drug benefit. Under Medicaid, rx companies to charge their lowest for medications, the Medicare program relies on competition to keep prices low.

By eliminating the need to discount drugs for the government, the industry can now pocket the savings.

And there is more:

A little-known study by the Prudential Equity Group from June 2005 estimated that the makers of three anti-psychotic medications stand to benefit most from the change, taking in roughly $1.1 billion in new profits on products used by the 6.4 million who are Medicare’s most poor and frail patients.

The rx’s and the companies to benefit responded as follows:

An AstraZeneca spokesperson questioned the study’s methodology, saying the profit estimate for Seroquel, a schizophrenia medication, was too high. AstraZeneca gave no alternate figures. A GlaxoSmithKline spokesperson wouldn’t discuss projected earnings for Lamictal, a treatment for bipolar disorder. A spokesperson for Lilly said the company expected only a “modest short-term benefit to sales” for Zyprexa under the Medicare program, but wouldn’t give specifics.

Zyprexa, also a schizophrenia treatment, is Lilly’s top-selling product, with U.S. sales of $2.04 billion in 2005. Lilly’s earnings per share could rise by 6 percent in 2006 just by escaping the rebates, the Prudential study estimates.

With U.S. sales of $2.76 billion in 2005, Seroquel’s increased Medicare profit could boost AstraZeneca’s earnings per share by 8 percent, the report found.

Stephen Schondelmeyer, a pharmaceutical economics professor at the University of Minnesota, stated,

“The argument that more plans will be more competitive doesn’t appear to be true. More players doesn’t result in lower prices if they have much smaller volumes and much less leverage.”

And he also said,

“The net effect over 10 years is probably closer to $40 billion in extra profit.”

Problems Predicted W/Medicare D:

No one knows the total number of people having problems with Part D, said Robert Hayes, president of the Medicare Rights Center.

“The quantification is going to have to come from the federal government…Don’t expect it soon…The immensely complicated structure of this drug benefit guaranteed massive confusion for drug stores and consumers…We are also seeing massive confusion by federal officials and the employees of the for-profit insurance companies sponsoring the drug plans.”

He also said the current problems were predictable.