PhRMA pledges $80 billion in discounts towards health reform cost-cutting

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PhRMA has committed to finding $80 billion in savings on drugs sold in the US over ten years, including selling drugs at half-price to seniors in the Medicare Part D “donut hole” coverage gap.

Details of the plan are still up in the air, said industry sources. Beyond filling in the “donut hole,” it remains unclear what concessions PhRMA members will be pledged to make – or what they'll get in return. Increasing Medicaid rebates is one cost-saving measure being considered. Among possible incentives, whether explicit or implicit, for the industry to cut a deal are congressional threats to rescind tax deductability for advertising costs, allow drug importation and impose draconian transparency requirements that could make it prohibitively costly for companies to promote their products.

PhRMA SVP, communications Ken Johnson dismissed that line of reasoning as "cynical."

"We believe it has to be a shared sacrifice if everyone is to have access to high-quality, affordable coverage and services," said Johnson. "For so many years, our critics have accused us of putting profits ahead of patients. Well, who were the first ones to step up to the plate and help the President enact fundamental healthcare reform? Our members."
 
The deal, which PhRMA President and CEO Billy Tauzin and a handful of industry execs negotiated with the White House and Senate Finance Committee Chair Max Baucus (D-MT), pledges PhRMA members to charging the government $80 billion less over the next decade. Johnson said details won't be finalized until the plan is scored by the Congressional Budget Office.

President Obama hailed the agreement in a statement and in remarks delivered at a press conference with AARP officials.

“The agreement by pharmaceutical companies to contribute to the health reform effort comes on the heels of the landmark pledge many health industry leaders made to me last month, when they offered to do their part to reduce health spending $2 trillion over the next decade,” said Obama. “We are at a turning point in America's journey toward health care reform. Key sectors of the health care industry acknowledge what American families and businesses already know - that the status quo is no longer sustainable. The agreement reached today to lower prescription drug costs for seniors will be an important part of the legislation I expect to sign into law in October. And to do that we're going to have to work together to root out waste and inefficiencies that may pad the bottom line of the insurance industry, but add nothing to the health of our nation. To that end, the pharmaceutical industry has committed to reduce its draw on the health care system by $80 billion over the next 10 years as part of overall health care reform.”

Tauzin said in a statement: “We recognize that a medicine which sits on a shelf out of reach of patients financially doesn't do anyone any good. Working together with President Obama, Senate Finance Committee Chairman Baucus and other congressional leaders, we have now taken an important first step toward achieving comprehensive health care reform this year.”

Joining Tauzin in hashing out the details were the members of PhRMA's governing committee, which includes representatives of Pfizer, Merck, Amgen, AstraZeneca and Abbott Labs. They reached agreement on the broad outlines of the plan Friday evening, after discussions spanning several months and capped by frenzied negotiations in the final 24 hours, said PhRMA's Johnson.
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