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Analysis: Pharmaceutical Industry Profits Increase by Over $8 ...

Source: oversight.house.gov
Topic: Pharmaceutical Industry

Sort Desciption: Pharmaceutical Industry Profits Increase by Over. $8 Billion After Medicare Drug Plan Goes Into Effect. This analysis examines the profit reports of the ten ...

Content Inside: R EP . H ENRY A. W AXMAN R ANKING M INORITY M EMBER C OMMITTEE ON G OVERNMENT R EFORM U.S. H OUSE OF R EPRESENTATIVES S EPTEMBER 2006 Analysis Pharmaceutical Industry Profits Increase by Over $8 Billion After Medicare Drug Plan Goes Into Effect This analysis examines the profit reports of the ten largest pharmaceutical manufacturers for the six-month period following the start of the new Medicare drug program. It finds that in the six months after January 1, 2006, when the Medicare drug program went into effect, pharmaceutical industry profits increased by over $8 billion. The Medicare drug program contributed to this surge in drug industry profits through a combination of increased utilization, higher prices, and switching “dual-eligible” beneficiaries from Medicaid to Medicare. Background The new Medicare drug plan was passed by the Republican Congress and signed into law by President Bush in December 2003. Since its inception, the program has been seen as a potential boon for the pharmaceutical industry. Analysts predicted that because of the privatized structure of the program and the ban on federal negotiations with drug manufacturers for price discounts, taxpayers and Medicare beneficiaries would be forced to pay high prices for prescription drugs. 1 Several investigations have confirmed these predictions. Reports released by Rep. Henry A. Waxman have showed (1) that the private Medicare drug plans have been unable to negotiate low prices for brand-name drugs, 2 and (2) that drug manufacturers have raised prices rapidly after the commencement of the new program. 3 Some analysts have estimated the high prices paid by the Medicare drug plans would mean tens of billions of dollars in additional profits for drug manufacturers. 4 The release of second quarter profit reports by large pharmaceutical companies represents one of the first opportunities to gauge the impact of the new Medicare drug program on drug industry 1 See, e.g., Families USA ...

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