Greater Drug Costs for Seniors...and Less Research

The debate on the debt ceiling rages on in Washington, D.C.  Last week Rep. Henry Waxman (D-CA) and Senator Jay Rockefeller (D-WV) proposed an additional tax on drug manufacturers who supply medicines for Medicare Part D. The proposal is supported by the White House.

A little background is needed here.

Medicare Part D was passed by Congress in 2003 and allows seniors to obtain prescription drugs through competitively negotiated plans. Part D is now 40 percent below the original cost-estimates done by the Congressional Budget Office. In other words, a free market approach has worked in the Medicare program.

Medicaid is a state/federal taxpayer-funded health insurance plan for the poor. Prescription drug choices for Medicaid patient are determined by the government. Drug manufactures who provide drugs for Medicaid patients pay a rebate, or tax, back to the government for the privilege of access to the program. The Waxman/Rockefeller plan would turn Medicare Part D into a Medicaid-like drug program.

The American Action Forum has researched the impact of the proposed bill on seniors.

Drug manufacturers and the biotech industry would absorb some of this tax, but a lot of it would come from less money for drug research and from an increase in premiums for seniors. Almost 80 percent of new drugs and medical devices come from the United States. Less money for research and development would have a severe negative impact on medical innovation.

The bill would also eliminate most of the competitive cost savings for seniors and would drive premiums up by 20 to 40 percent. Out-of-pocket expenses for 17.7 million seniors would increase by an estimated $1.5 to 3.7 billion per year.

Out-of-control federal spending must be addressed. It is bad public policy, however, to close the federal deficit by eliminating a cost-savings drug program for seniors. It is also bad public policy to hinder or curtail life-improving drug research.