PhRMA slams 'radical' proposal on drug pricing in Obama's SOTU

The pharmaceutical industry's leading trade group pushed back hard against President Obama's renewed call to slash Medicare payments for prescription drugs.

Obama outlined healthcare savings in his State of the Union address Tuesday night, which included a plan to "reduce taxpayer subsidies to prescription drug companies." It was a veiled reference to his proposal to offer rebates in Medicare Part D — the part that pays for drug coverage.

“The president has again proposed to upend the successful Medicare Part D prescription drug program by imposing government price controls on it," the Pharmaceutical Research and Manufacturers of America (PhRMA) said in a statement. "The facts about Part D are simple and do not support this radical proposal."

Obama has proposed the Part D rebates before, and the policy has long been a priority of liberal Democrats in Congress. His proposal would save the government roughly $138 billion over 10 years, according to the Congressional Budget Office's analysis of the most recent White House budget proposal.

Rebates were part of the controversial deal PhRMA struck with the White House and Senate Democrats during the healthcare debate of 2009 and 2010. Democrats agreed to leave rebates out of the healthcare legislation, and drug makers agreed to help finance key parts of the overhaul.

Adding rebates to Part D — effectively bringing Medicare payments closer to the much lower prices that Medicaid pays — would undermine the popular and successful Part D program, PhRMA stated.

Part D has cost the government 45 percent less than originally expected.

“The president’s proposal to tamper with a program that works well would not yield any benefit for seniors," PhRMA said. "Instead, analysts have projected that the president’s scheme would harm Part D’s competitive dynamics, yielding higher premiums, more restrictive access to medicines and diminished research on the next generation of medicines."

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