REPORT: White House To Extract Savings From Pharma In Debt Ceiling Negotiations

In response to my question about pharmaceutical cuts being included in the debt ceiling negotiations, The Hill’s Julian Pecquet reports that Republicans and Democrats may both agree on a provision to extend Medicaid drug rebates to dual eligibles:

By demanding that the rebates count as revenue raisers rather than spending cuts, Republicans would be able to say they’re meeting Democrats halfway — without actually having to raise taxes, which is anathema to conservatives. The proposal would extend Medicaid drug rebates to the nation’s 9 million “dual eligibles,” who are on both Medicaid and Medicare but aren’t currently covered by the rebates.

“This way [Republicans] can look like they’re going along with something that raises funds,” said a well-placed health policy consultant.

The source points out that there’s some precedent for that claim, since part of the drug lobby’s contribution to the healthcare reform law came in the form of rebates for seniors who reach the Medicare “doughnut hole.” And since drug rebates are already offered in the Medicaid program, Republicans could claim they’re simply extending current law into Medicare’s Part D drug benefit.


Back in 2003, the Medicare part D legislation moved the 6 million Americans who were eligible for both Medicare and Medicaid into the Medicare part D program, thus creating a windfall for the industry. Whereas Medicaid obtained an average discount of about 34 percent from pharmaceutical companies that participated in the Medicaid program, “the average discount obtained by the Part D plans was 14 percent,” according to a report issued by Rep. Henry Waxman (D-CA). As he put it, “The drug companies are making the same drugs. They are being used by the same beneficiaries. Yet because the drugs are being bought through Medicare Part D instead of Medicaid, the prices paid by the taxpayers have ballooned by billions of dollars.” CBO estimates that if drug manufacturers provided the Medicare Part D program with the same prices that Medicaid receives, the government could save $112 billion over 10 years.

One Washington investment analyst tells Pecquet, “PhRMA is scared, and I think they have reason to be.”