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Medicare 'doughnut hole' relief could be offset by higher prescription drug prices

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By David S. Hilzenrath
Washington Post Staff Writer
Tuesday, September 21, 2010; 8:07 AM

If you've ever seen a sale advertising 50 percent off, you might have wondered if the retail price was ratcheted up to make the discount possible.

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Patient advocates are watching to see if a similar tactic undermines one of the most widely publicized benefits of the health-care overhaul that President Obama signed in March.

Beginning next year, at the expense of pharmaceutical companies, millions of senior citizens in the Medicare coverage gap known as the "doughnut hole" will receive 50 percent discounts off the price of brand-name prescription drugs.

The government does not control the underlying prices; the law leaves that to the market.

"There is legitimate concern that some manufacturers will steeply increase the price of drugs in order to offset the cost of the discount to the manufacturers at the expense of both consumers and the Medicare program itself," the Center for Medicare Advocacy and the Medicare Rights Center said in a letter to the agency that oversees the federal health insurance program.

That agency, the Centers for Medicare & Medicaid Services, announced in August that the average monthly premium for Medicare prescription drug plans will rise next year by a dollar, to $30.

Officials at the agency and at the Pharmaceutical Research and Manufacturers of America (PhRMA), an industry group, said the average premium increase indicates that there has been no spike in prescription drug prices.

Competition in the drug market will serve as a restraint, they said.

"I am confident we will continue to see very low price growth" for the Medicare drug program, said Jonathan Blum, deputy administrator of the government's Center for Medicare.

But others are worried about the long-term outlook. UnitedHealth Group, which sells prescription drug insurance, has expressed concern "that Manufacturers have not agreed . . . to protect the underlying pricing of the drugs."

In a June letter to the Health and Human Services Department, UnitedHealth took the extraordinary step of calling for price controls, saying the government should "require Manufacturers to maintain a ceiling on prices that would preserve the value of the discount for beneficiaries."

"I don't think all savings will be lost. But they can certainly recoup some of those savings by increasing prices," said John M. Coster, senior vice president for government affairs at the National Community Pharmacists Association.


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