Obama, AARP trumpet drug-costs deal

President Obama formally announced a deal with the pharmaceutical industry that would save Medicare beneficiaries significant amounts of money on their prescription drugs.

Obama praised the $80 billion agreement, struck between the White House, Senate Finance Committee Chairman Max Baucus (D-Mont.) and the Pharmaceutical Research and Manufacturers of America (PhRMA), as a milestone on the road toward comprehensive healthcare reform.

ADVERTISEMENT
“This is a significant breakthrough on the road to healthcare reform — one that will make the difference in the lives of many older Americans,” said Obama, who was flanked by Baucus, Sen. Chris Dodd (D-Conn.) and AARP CEO A. Barry Rand.

“This is an early win for reform and a major step forward. It is a signal the process is working and will work. But AARP is not done. We will continue to work with you, Mr. President, and the House and the Senate,” said Rand, who introduced Obama.

“With the strong support of AARP, we believe this agreement will be looked back in time as a momentum changer in the legislative efforts to reform our troubled healthcare system,” PhRMA President and CEO Billy Tauzin, who was not present for the announcement, said in a statement.

By allying the drug industry and the AARP on this issue, Obama again demonstrated that a key element of his strategy on healthcare reform is to bring influential interest groups close to him.

Not only does this create the impression that support is building for healthcare reform, Obama makes it more difficult for groups to back away as the process moves forward, even as he demands sacrifices from the constituencies affected.

“Drug and insurance companies stand to benefit when tens of millions more Americans have coverage,” Obama said. “So we're asking them, in exchange, to make essential concessions to reform the system and help reduce costs. It's only fair.”

Unwelcome news about the high cost of healthcare reform and how to pay for it hit lawmakers hard last week, and Republicans demonstrated unity in their opposition to key elements of the Democrats’ proposals. Together, these developments threatened to stall the momentum Obama and his Democratic allies were hoping to build for the president’s foremost domestic policy initiative.

At the White House on Monday, Obama insisted he would not be swayed and sought to recall the spirit of his victorious presidential campaign.

“To those who, here in Washington, who’ve grown accustomed to ‘sky is falling’ prognoses and the certainties that we cannot get this done, I have to repeat — revive — an old saying we had from the campaign: ‘Yes, we can.’ We are going to get this done,” Obama said.

The deal struck with PhRMA would narrow the so-called doughnut hole in the Medicare prescription drug benefit. Under that program, seniors must pay the full cost of drugs when their annual spending surpasses $2,700 until it reaches $5,100, after which they pay just 5 percent.

PhRMA has agreed to charge seniors half the price of their medications when they reach the doughnut hole. The full value of the drugs would be counted toward their benefit, however, making it easier for beneficiaries to obtain the more generous 95 percent coverage.

“This gap in coverage has [placed] a crushing burden on many older Americans who live on fixed incomes and can’t afford thousands of dollars in out-of-pocket expenses,” Obama said.

ADVERTISEMENT
The agreement is understood not to apply to wealthier Medicare beneficiaries. The poorest people enrolled in the Medicare drug benefit already receive generous subsidies for the medicines.

Democrats have eyed fixes to the doughnut hole since President George W. Bush and the Republican Congress created the drug benefit in 2003. The high cost of doing so has discouraged action, however. The drug industry’s participation goes a long way to overcoming that burden.

The agreement also reunites some of the most important players from the effort to enact the drug benefit.

PhRMA strongly supported the program, which delivered a lucrative market to its member companies. Baucus attracted the ire of many fellow Democrats by being one of just two members of his party to participate in the drafting of the final bill. Likewise, the AARP angered many Democrats by endorsing the bill.

Much like during the Medicare drug benefit deliberations, PhRMA and the AARP also achieve victories for their constituencies.

Drug makers may be seen as forfeiting $80 billion but the reality is not so simple. Many seniors who would avail themselves of half-price medicines would simply have done without in the absence of discounts. Moreover, PhRMA’s collaboration with Baucus also could shield them from legislative proposals that would cut deeper into their revenue.

The AARP, meanwhile, gets to claim credit for endorsing a policy change that would have real benefits for many of its members.

More in Finance

Obama trumpets job growth

Read more »