While President Obama’s Healthcare Reform Law touts big savings on prescription drugs under Medicare Part D, a Kaiser Family Foundation Study reveals minimal savings for years to come. Additionally, these savings and the manufacturer discount will likely be offset by significant increases in retail drug prices.
Affordable Care Act Eroded by Skyrocketing Prescription Costs While President Obama’s Healthcare Reform Law touts big savings on prescription drugs under Medicare Part D, a Kaiser Family Foundation Study reveals minimal savings for years to come. Additionally, these savings and the manufacturer discount will likely be offset by significant increases in retail drug prices. Obama’s Affordable Care Act The Affordable Care Act was designed to strengthen the Medicare Part D program and ensure that it will continue to provide health security to seniors for many years to come. The Act proposes to reduce Part D enrollees’ out-of-pocket costs when they reach the coverage gap, commonly referred to as the “doughnut hole.” The Medicare Part D “doughnut hole” has provided difficulties to cash strapped Americans, who need help to pay for life saving medications since the inception of the program. Often the coverage gap affects a patient when financial help and prescriptions are needed the most. The Kaiser Family Foundation, a non-profit private operating foundation that’s dedicated to research and analysis on health issues, has delved into the effects that the “doughnut hole” has had on prescription costs for seniors. According to the foundation, since the Medicare Part D drug benefit took effect in 2006, beneficiaries enrolled in Part D plans have been required to pay 100 percent of their prescription drug costs after their total drug spending exceeds an initial coverage limit until they qualify for catastrophic coverage. The gap in coverage was $3,610 in 2010 and is projected to exceed
Date Source: Kaiser Family Foundation
$6,000 by 2020. In 2007, an estimated 3.4 million Part D seniors reached the coverage gap and were forced to pay 100 percent of the cost for prescribed drugs. The Affordable Care Act was created to address the “doughnut hole” problem head on, with a rebate, drug manufacturer discounts and federal subsidies. By 2020, 75 percent of the price of brand name and generic drugs will be covered under these measures. Already in 2011, the Affordable Care Act has begun to address the gap, beginning with a 50 percent discount on the total cost of brand-name prescription drugs that fall into the “doughnut hole.” Each year, prescription costs will be reduced further, and people with Medicare will be required to pay their normal cost-sharing amount for prescriptions until they reach the annual out-of-pocket limit.
Date Source: Kaiser Family Foundation
While the aims of the Affordable Care Act seem beneficial to Americans on the surface and a feelgood fix for the Obama administration, the pharmaceutical industry stands to make gigantic profits from the legislation through price inflation, price fixing and governmental lobbying – and millions of Americans are already being affected by this inflation. Price offsets likely to negate discounts Recent investigation found, while manufacturer discounts attempt to close the “doughnut hole”, escalating drug prices would quickly offset the benefits of discounted medications. As President Obama and other politicians continue to push for a fair deal for American patients from pharmaceutical manufacturers, the prices of brand-name prescriptions are skyrocketing.
In late 2010, Amgen, the worlds largest biotech company projected revenues of $15.1 billion for the year and exceeded analysts forecasts. Amgen’s star pharmaceutical, Enbrel prescribed to treat the symptoms of rheumatoid arthritis, increased in sales by 3 percent to $939 million. The sales were enhanced by a nearly 5 percent price increase. In the second quarter of 2011, profits from Enbrel rose 9 percent on the wings of price increases. With America in economic recession and record high unemployment sparking rallies in the streets, new research from October 2011 reveals that employment in the biotech industry rose by an incredible 632 percent in the past five years in the state of California alone, including Amgen.
Source: Barclays Capital
Barclays Capital recently crunched the numbers for 130 top selling pharmaceutical drugs as indicated by sales. Brand name prescriptions have increased in price as much as 29 percent since 2010. Plavix has increased over 13 percent. In early 2010, Benicar, was one of the most affordable medications used to treat high blood pressure in its class. Within the year, a monthly supply of 20 milligram tablets topped out at $88.80, a 29 percent price increase. Seniors may only see a small amount of savings until 2020 Seniors will see subsidies in the coverage gap for brand-name drugs beginning in 2013 of only 2.5 percent. At that point, the cost sharing will break down to 47.5 percent paid by the senior and 2.5 percent paid by the government plans, with the remaining 50 percent covered by a manufacturer discount. For generic drugs, the plan will reduce seniors’ out-of-pocket costs by 7 percent each year and inversely increase the amount paid by Medicare Part D by 7 percent each year. Over the next 8 years, the out-of-pocket cost for prescriptions will slowly reduce until finally, in 2020, seniors enrolled in Medicare Part D will have 75 percent of their prescription costs covered.
While the Affordable Care Act slowly distributes financial responsibility away from seniors, the the size of the “doughnut hole” is expected to increase almost two fold by 2020. More importantly, the artificial inflation of prescription drugs prices of 20 percent per year or more would significantly diminish the cost savings and shift the burden of paying for over-priced prescription drugs back onto the American patient. In the end, this arrangement may only benefit PhRMA. Americans under 65 still paying premium prices at the cost of their health The high price of prescription drugs for Americans under 65 is playing an increasingly greater role in the future of the healthcare system. These Americans are not only being prescribed medications more than ever before, but the number of prescription drugs per patient has increased, as has the period of time for which the medication is administered. This increased use and spending has largely centered on the elderly because of its implications with medicare prescription drug benefits. Prescription drug costs are a concern to the health and welfare under-65 population as un or under insured patients may forgo other medical treatments to afford the drugs. It's clear that those lacking drug benefits is a form of underinsurance: non-elderly adults who have health insurance but minimal or no prescription drug benefit are exposed to exorbitant out-of-pocket costs and crushing medical bills. Whether this group of Americans are uninsured or underinsured, being without insurance increases the likelihood of going without prescription drugs or going into debt to make do. These prescription drug costs and the way that they affect non-elderly adults is only one part of the problem, as the non-subsidized medicines tend to eat away at a patient's ability to afford other life saving medical treatments and follow up care. PhRMA Fights Back with Lobbyists and Excuses Drug firms claim that they are driving costs to prepare for lost revenue as popular drugs’ patent protections expire. By hiking prices, PhRMA will be trying to keep their profits up. The pharmaceutical industry is working overtime to make sure that the general public is unable to address this increasing inflation, especially as tens of millions of currently uninsured Americans begin to enroll in healthcare plans and effectively give PhRMA companies new business. As the Affordable Care Act was being vetted by legislators, thousands of lobbyists working on behalf of the pharmaceutical companies flooded Capitol Hill, to ensure that big PhRMA would continue to profit. Figures show that the industry spent $188 million on lobbying in 2009 alone and also spent $67 million on TV ads in support of the Affordable Care Act bill, accounting for a quarter of total advertising behind the legislation. To make up for the costs associated with this heavy lobbying and advertising, the pharmaceutical industry has steadily been raising drug prices. The AARP Public Policy Institute’s most recent Rx
Price Watch Report analyzing retail price trends found that ahead of healthcare reform, retail prices for 217 brand-name prescription drugs widely used by Medicare beneficiaries increased by an average of 8.3 percent in 2009. This increase was notably higher than the rates of increase for retail prices in the prior five years. For those taking drugs for a chronic condition, the study found that the average retail cost of brandname medications in 2005 – the year before Medicare Part D was implemented – was $1,049. By 2009, that number had jumped approximately 32 percent to $1,382. Over time, the cumulative effect of these retail price increases will be substantial. In fact, the AARP study concisely outlines the scary facts many Americans are facing, stating, “the recently passed health care reform legislation has provisions that are designed to phase out the Medicare Part D coverage gap through discounts on brand name, biologic and generic prescription drugs. Part D enrollees will continue to be exposed to the effects of the doughnut hole until the legislation’s provisions are fully implemented in 2020. However, the value of closing the doughnut hole, while potentially substantial, could be eroded over the years if escalating drug prices are not addressed.”
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