Critics have complained that a drug industry got a sweetheart deal when it struck a bargain with the White House and Senate Finance Committee over health care reform.In other words, since the subsidies to close the Medicare Part D donut hole are only good on brand-name drugs and not cheaper generics, it's the Bush Part D subsidy all over again.There’s new reason to think those critics were right.
It comes from an October forecast by IMS Health, a respected global research and consulting firm. The report, which IMS distributed to clients and which a source provided, projects that the drug industry will see average annual growth of 3.5 percent between 2008 and 2013.
Back in March, IMS had projected no growth at all during that same five-year stretch. In fact, it projected the drug business would actually contract slightly--with negative annual growth of 0.01 percent.
What changed? A major factor, according to IMS, was the emerging details of health care reform.
Health reform, as currently envisioned, wouldn’t merely bring coverage to the uninsured. It would also fill in the “donut hole” in Medicare Part D--the gap in coverage that leaves beneficiaries with serious health problems paying for hundred if not thousands of dollars in out-of-pocket prescription costs.
In addition, because it will take several years to close the donut hole, reform relies on voluntary discounts from the pharmaceutical industry to make drugs more affordable in the intervening years. But those discounts would apply only to name-brand drugs, not generics.
Put it all together, and you have more demand for name-brand drugs. As a result, IMS believes, pharmaceutical companies would be able to raise their prices--enough to boost revenue significantly: "If this bill is implemented," the report concludes on page 138, "an increase in prices on new drugs can be expected."
Shoveling money to Big Pharma is what it takes to get any sort of reform. Nice.
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