UPDATED: PhRMA agrees to major drug discounts

The Democrats' hopes to pass healthcare reform this year got a boost on Friday when drug manufacturers approved a measure that would produce billions in savings on drug purchases with government programs like Medicare if the Democrats can pass healthcare legislation.

The Pharmaceutical Research and Manufacturers of America (PhRMA) approved a measure on Friday that would provide $80 billion in price reductions on drugs in the next 10 years, the Washington Post reports.

The news comes as Democrats are struggling to come up with ways to pay for sweeping reforms. This week the Congressional Budget Office said the two leading Democratic proposals in the Senate would cost well over $1 trillion. That led Republicans to criticize such spending in a recession and Senate Finance Chairman Max Baucus (Mont.), the author of one of the Democratic proposals, to vow to cut billions from his bill.

The Post reports that PhRMA's measure would provide significant relief to seniors if the Democrats are able to pass healthcare legislation. In particular, it would help 3.4 million elderly and disabled Americans who pay the full price for drugs once they pass the $2,200 $2,700 threshold in expenses but before they hit the $5,100 $6,200 mark - otherwise known as the "doughnut hole."

PhRMA's measure would provide the drugs for those in the doughnut hole at half price.

UPDATE: President Obama issued a statement Saturday evening calling the agreement a "turning point in America's journey toward healthcare reform."

Obama said the so-called "doughnut hole," or seniors whose drugs are not covered by Medicare when they total between $2,700 and $6,200, is a "continuing injustice" that this agreement will end.

"This deal will provide significant relief from that burden for millions of American seniors," Obama said.

In a statement, PhRMA president and CEO Billy Tauzin and Chairman David Brennan also noted that the agreement means that medicine purchased in the coverage gap "would count toward the beneficiary's out-of-pocket costs, thus lowering their total out-of-pocket spending."

"PhRMA is committed to working with the Administration and Congress to help enact comprehensive health care reform this year," the PhRMA executives added.

In a statement, Baucus said the agreement would give Health and Human Services Secretary Kathleen Sebelius the authority to create a new Medicare Prescription Drug Discount Program on July 1, 2010. That program would be administered by an independent third party.

"The Medicare prescription drug benefit we created helped address the problem of skyrocketing prescription drug prices for millions of seniors. Today, we helped fill the gap in coverage and finished the job," Baucus said. "This new coverage means affordable prices on prescription drugs when Medicare benefits don't cover the cost of prescriptions."

Obama also noted that he still plans to sign health care reform legislation into law in October.

jeremy.jacobs@thehill.com