NCPA - National Center for Policy Analysis

Pharmaceutical Industry Shifts On Drug Benefits

February 19, 1999

Over the years, drug makers have consistently opposed proposals that Medicare pay for drugs prescribed for non-hospitalized patients. They feared price controls would inevitably accompany Medicare payments. Now the opposition of the pharmaceuticals industry is weakening.

  • Yesterday, the industry released a statement saying it now supports expansion of Medicare to cover the cost of outpatient prescription drugs, but only if payments go to help Medicare recipients buy private insurance to pay for them.
  • Drugs cost 30 percent to 100 percent more in the U.S. than in many foreign countries, where prices are regulated.
  • However, the price freedom and resulting profits make the U.S. the global center of drug research and the source of a host of innovative drug therapies.
  • Roughly 35 percent of the 40 million or so Medicare beneficiaries must use their own money for drugs taken outside of hospitals -- because they don't have a private drug-insurance plan and aren't covered by a private retirement program.

The altered stance of the trade group, the Pharmaceutical Research and Manufacturers of America, is due in part to fear of a bill introduced by U.S. Rep. Tom Allen (D-Maine). That legislation would force the drug industry to sell medications to the elderly at a deep discount. "If we had the Allen bill," one pharmaceuticals representative warns, "we are out of business."

Critics point out that Medicare is already headed for deep financial troubles. Burdening it further with yet another expensive entitlement at this time is simply beyond reason, they say.

Sources: Lucette Lagnado, Laurie McGinley and Elyse Tanouye, "Idea of Having Medicare Pay for Elderly's Drugs Is Roiling the Industry," Wall Street Journal, February 19, 1999.


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