NCPA - National Center for Policy Analysis

Pharmaceutical Firms Alarmed At Drug Discount Bill

December 18, 1998

A little-noticed bill introduced in Congress in September is being vehemently opposed by drug manufacturers. It would force the companies to extend "favored customer" status -- along with deep discounts on prescriptions -- to Medicare recipients. The bill was introduced by Rep. Tom Allen (D-Maine).

  • Congress has avoided for decades instituting a drug benefit for Medicare because of the high costs it would impose on taxpayers.
  • But the new bill would push the cost onto manufacturers by allowing senior citizens to purchase their prescription at the same low prices extended to members of big health maintenance organizations and federal government agencies.
  • The industry contends that the legislation would stunt vital research, add regulatory costs and ultimately harm the elderly by halting the development of promising drugs that could aid against the ravages of old age.
  • About nine million favored customers of drug companies now get discounts of as much as 60 percent -- a figure that could balloon to nearly 48 million if the Medicare population were included.

In that case, about 40 percent or more of the U.S. pharmaceutical market would suddenly have to be steeply discounted or put under price controls, drug industry officials say.

Source: Lucette Lagnado, "Drug Companies Slam Medicare-Discount Bill," Wall Street Journal, December 18, 1998.


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