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BIO study bolsters Medicare benefit

The US Biotechnology Industry Organisation (BIO) has released a study intended to disprove claims that the private companies that run the Republican-backed Medicare Part D benefit have been ineffectual at negotiating discounts with drug companies

In the latest chapter of the debate in the US over the Medicare prescription drug benefit, the Biotechnology Industry Organisation (BIO) has released a study intended to disprove claims that the private companies that run the Republican-backed Medicare Part D benefit have been ineffectual at negotiating discounts with drug companies.

According to BIO, the study shows that Medicare Part D is better at providing cost savings in the US than discount Internet retailers like Costco and drugstore.com.

The issue is a crucial one, because it is what underlies recent efforts to pass legislation in the US which would require the government to negotiate directly with drug firms over pricing. Senators Olympia Snowe (Republican for Maine) and Ron Wyden (Democrat for Oregon) recently introduced such legislation, claiming that the current law, which does not allow the government to engage in direct negotiation, is squandering buying power and wasting taxpayers' money.

The proposed legislation, known as S. 250 or "The Medicare Enhancements for Needed Drugs Act of 2007," would require the government to bargain over pricing for single-source drugs (those sold under only one brand name) and for drugs whose research and development was funded largely by taxpayers' dollars.

In explaining the rationale behind their proposal, Snowe and Wyden claimed that Costco and drugstore.com offered lower drug prices than Medicare Part D without restricting the medications available. This is evidence that the private plans running the Medicare drug benefit have not been as efficient at negotiating discounts as they should be, according to the Senators.

However, BIO says its new research shows that the Medicare drug plan already succeeds. The study, which relied on publicly available information on 25 single-source drugs and biologics, found average mail-order Part D prices were up to 20 per cent lower than drugstore.com and 17 per cent lower than Costco Internet mail-order cash prices.

"These discounts equated to average Part D savings of nearly USD 137 per therapy per month compared to drugstore.com and USD 142 per therapy per month compared to Costco," BIO noted. Cost-sharing and rebates generally mean that the out-of-pocket costs to the elderly enrolled in the Medicare drug benefit are even lower, the group noted.

BIO stressed that the Medicare prescription drug benefit also allows the elderly better access to a wide range of drugs. In spite of the Senators' assertion that discount Internet retailers provide savings without curtailing access, Costco and drugstore.com do limit the availability of certain innovative medicines, such as new cancer drugs like Sutent (sunitinib), Nexavar (sorafenib), and Sprycel (desatinib), which are available under Medicare Part D, according to the group.

"Thus, proposals that call for mandatory government interference in determining prices for drugs covered under Part D, such as S. 250, will only undermine the current success of the programme, and harm seniors' access to innovative medicines," BIO argues.

28th February 2007

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