Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


Drug Industry May Concede to Close the Medicare Prescription Drug Benefit's 'Doughnut Hole'

By Drew Armstrong, CQ Staff

January 14, 2010 --The drug industry is prepared to make billions of dollars in additional concessions as part of a deal to help congressional Democrats and the Obama administration pass their health care overhaul, according to industry and Hill sources.

A lobbyist for a major drug manufacturer said the industry has told the White House and top Senate Democrats that the makers of brand-name drugs might be willing to commit billions more in concessions to help close the Medicare prescription drug benefit's "doughnut hole" as long as key industry priorities are preserved in a final agreement.

Getting more money out of the industry as part of the health care overhaul would be a significant victory for House Democrats, like Henry A. Waxman of California, who have been deeply critical of drug companies.

It also would give House lawmakers greater leverage in talks with the Senate over melding their two bills (HR 3962, HR 3590). Conventional wisdom holds that the final product will most closely resemble the Senate version, which the drug industry generally prefers.

Rep. Frank Pallone Jr., D-N.J., confirmed Wednesday that the pharmaceutical companies had made such an offer. "I had heard from the industry that they were willing to do more," he said.

"It's now just about publicly announcing it and giving Waxman and some others some credit," said the drug industry lobbyist, who would speak only on condition of anonymity.

Pallone is chairman of the House Energy and Commerce Subcommittee on Health. Waxman chairs the full committee and has repeatedly called on the industry to make additional concessions. An offer of more money from the drug companies to help lower the cost of health care or pay for the bill might make it easier for Waxman and other liberal Democrats to support the eventual compromise.

But the additional money is far from a done deal. The industry could withdraw its support if it concludes that a final agreement contains other policies that work against its interests.

The lobbyist described the amount the industry is considering offering as between $15 billion and $20 billion, though other sources would not confirm that the range is that high. This additional concession could come in the form of deeper discounts to participants in Medicare's Part D program—the prescription drug benefit—than the industry and the White House agreed to in June.

Ken Johnson, senior vice president of Pharmaceutical Research and Manufacturers of America (PhRMA), an industry trade association, would not discuss any potential deal. "We don't comment on speculation and rumors," he said.

Karen Lightfoot, a spokeswoman for Waxman, also offered no details. "We aren't commenting on any details related to the ongoing health care discussions between the House, Senate and the White House," she said.

The industry is deeply opposed to the House legislation.

"The House bill, as passed, would have the unintended consequences of killing tens of thousands of jobs in our industry at a time when the U.S. economy is struggling and unemployment is hovering around 10 percent," Johnson said in a prepared statement. "This is absolutely the worst time to be putting additional strains on the economy with punishing job losses. Worst of all, it would have a chilling effect on critically important R&D in America, impacting patient care for generations."

Drug makers have spent more than $150 million to support Democrats' health care overhaul through ad buys and other efforts. They also have spent tens of millions of dollars on lobbying.

In June, the White House and PhRMA announced a deal to cap the drug manufacturers' contribution to the cost of an overhaul at $80 billion. In return, the White House agreed not to seek significant reductions in drug prices under Medicare.

The industry's contribution would come primarily as a substantial discount for Medicare Part D participants when they enter a gap in prescription drug coverage known as the "doughnut hole." Those discounts would amount to $80 billion in savings over a decade.

On Wednesday, Pallone said: "My understanding is that PhRMA is willing to do more than they did in the White House deal."

In the House and Senate bills, lawmakers have used the $80 billion to offset the bill's cost. The Senate bill, for example, would charge drug makers $22.2 billion in fees over a decade. It also writes the PhRMA "doughnut hole" discount into law.
"PhRMA's not walking away at this point; they've mostly gotten what they want," the lobbyist said.

Senate Democrats and the White House have already defended that deal once, when the Senate voted last month to reject an amendment from Byron Dorgan, D-N.D., that would have allowed individuals to import prescription drugs from abroad, where prices are often cheaper. The industry strongly opposes such a policy, which was projected to save the government $19.4 billion over a decade.

"There's certain things that just can't be done to PhRMA," the lobbyist said.

Publication Details