AARP to Endorse Plan to Cut Drug Costs

By Ceci Connolly
Washington Post Staff Writer
Monday, June 22, 2009

AARP, the nation's largest seniors lobby, will give its blessing today to an offer by drug manufacturers to contribute $80 billion over the next decade to reduce the cost of comprehensive health reform, in part by discounting the price of Medicare prescriptions.

Barry Rand, chief executive of AARP, will join President Obama at the White House to announce the endorsement of an organization that boasts 40 million highly engaged, politically active members.

"This is an early win for reform and a major step forward," Rand said in remarks prepared for delivery at the event.

After weeks of secret talks, the pharmaceutical industry trade group voted Friday to dedicate $80 billion to lowering the price of medicines sold to seniors and the government. The unusual offer by the Pharmaceutical Research and Manufacturers of America (PhRMA) is part of its effort to convince skeptical lawmakers that it backs major health-care legislation.

Though the agreement represents a fraction of the total cost of health-care reform, it has been managed for maximum public relations exposure.

News of the PhRMA vote leaked out Friday night. On Saturday afternoon, Senate Finance Committee Chairman Max Baucus (D-Mont.) put out a news release announcing that he had "secured an $80 billion commitment" from drugmakers. Yesterday, AARP let it be known it supported the action. Today, cameras will be invited to record the White House ceremony celebrating the accord.

When the Medicare prescription drug benefit approved by Congress went into effect in 2006, it left a coverage gap that charges seniors the full cost of medications once a patient has received $2,700 worth of drugs, until the total reaches about $6,100. At that point, "catastrophic" coverage kicks in and covers nearly all drug expenses.

"The existence of this gap in coverage has been a continuing injustice that has placed a great burden on many seniors," Obama said over the weekend.

Under the proposal, seniors who fall into the coverage gap known as the "doughnut hole," would pay half price for all brand-name medicines. The discounts could save 3.5 million retirees up to $1,700 a year, according to AARP. In addition, the full price of the drug would count toward a person's out-of-pocket total, thus maximizing the insurance benefit.

"Millions of Americans who fall into the coverage gap stop taking their medications because they cannot afford them," according to Rand's written remarks. "They will have a new opportunity to lead a healthier life."

Some wealthy beneficiaries -- perhaps those earning more than $85,000 a year -- would probably continue to pay full price, according to an industry source.

It was not immediately clear how much of the $80 billion would benefit Medicare beneficiaries directly and what portion would accrue to the federal treasury. The offer is contingent upon enactment of a sweeping health-system overhaul.

For the past week, Obama and congressional Democrats have struggled to overcome anxiety that extending health coverage to tens of millions of uninsured Americans may cost the nation more than $100 billion a year. While surveys show a majority of voters are eager for broad changes to the nation's health system, polls also indicate growing unease over the rising deficit and the financial burden of a series of industry bailouts.

Several senators appearing on talk shows yesterday voiced concerns about the health costs and challenged Obama's support for a government-run insurance program that would be created to compete with private insurers.

"So we're in the position of dialing down some of our expectations to get the costs down so that it's affordable and, most importantly, so that it's paid for," said Sen. Charles E. Grassley of Iowa, the ranking Republican on the Finance Committee.

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