Tax bill would lead to steep drug discounts

By Julian Pecquet - 05/24/10 06:46 PM ET

Drug makers would have to offer steep discounts to hospitals that treat the poor under the tax extenders bill expected to hit the House floor on Tuesday.

A similar provision was included in the Senate’s healthcare reform bill but was stripped from the final healthcare package approved by Congress amid heavy lobbying by the drug industry.

The new language would require that discounts be provided for patients who don’t have prescription drug coverage, a substantial change from the earlier provision that would have mandated discounts for all patients.

Sources said they expect the drug industry to support it. The Pharmaceutical Research and Manufacturers of America (PhRMA) is not commenting on the legislation.

Hospitals that should benefit from the discounts, meanwhile, say more needs to be done.

“We don’t think this is a replacement for the full [Senate health reform] legislation,” said an official with the organization Safety Net Hospitals for Pharmaceutical Access. “We see it as a new program and we’re still evaluating the legislation to see how it would be useful to hospitals.”

Under current law, drug makers must offer deep discounts to federally qualified health centers and other places that serve poor patients — but only for outpatient care, which covers patients who haven’t been admitted to a facility such as a hospital.

The Senate health reform bill would have extended the discounts to cover inpatient drugs as well, but the provision was removed when PhRMA and others groups engaged in heavy last-minute lobbying on the issue.

The discounts in the tax extenders bill would also cover inpatient drugs but would apply to fewer hospitals than the original provision, the hospital group official said. It would also cover fewer people, since many patients who seek care in hospitals that serve the poor have Medicaid prescription drug coverage and wouldn’t be eligible for the discount.

While the discount provision would only cost the federal government about $35 million over 10 years and is relatively uncontroversial, passage of the tax extenders bill itself remains in doubt.

Blue Dogs in the House have raised concerns with the nearly $200 billion price-tag at a time of high deficits.

In the Senate, centrist Republicans want more of the bill’s cost to be offset with spending cuts or revenue raisers, while some Democrats are balking at a new tax on “carried interest” income commonly paid to hedge fund managers and venture capitalists. That tax change would raise $18.7 billion to pay for parts of the bill.

Republicans are already hammering what they’ve taken to calling the “Deficit Extender Bill.”

“This is not a ‘jobs’ bill,” reads a memo from Ways and Means Republicans obtained by The Hill. “It’s just another stimulus spending bill that increases the deficit by $134 billion — or by more than $1,000 for every American household.”