The $80 billion over 10 years pledged by US drugmakers to help seniors and disabled people afford their medications will turn out to be money well spent by the industry, experts suggest.

Sector spokesmen have said that the size of the deal, which was agreed between the Pharmaceutical Research and Manufacturers (PhRMA) of America and Senate Finance Committee chairman Max Baucus at the weekend, is at the limits of what the industry can afford, but the $80 billion is considerably less than the $130 billion originally sought by legislators as the weeks of secret negotiations got underway.

Moreover, the 50% discount on the cost of brand-name drugs which companies will provide for enrollees in Medicare’s prescription drug programme, known as Part D, once they reach the scheme’s “doughnut hole” coverage gap, will enable them to continue filling their prescriptions with their existing branded medications, thus boosting sales of companies’ most-profitable products at a time when they are most vulnerable. Many of the 3.4 million Americans, or 20%-25% of those enrolled in Part D who are estimated to fall into the doughnut hole, stop taking their medications as soon as the coverage gap begins, or move to cheaper generics.

President Barack Obama has welcomed the deal as a “turning point in America’s journey towards health care reform,” but details of how it will work are currently scarce and are expected to remain so until the Congressional Budget Office (CBO) conducts a review of the plan. Administration spokesmen have said that the industry’s $80 billion contribution will consist of around $30 billion for the seniors’ discounts and the other $50 billion as unspecified savings towards the health reform legislation.

The President has also urged other health care industry groups to follow PhRMA’s lead in negotiating cost-cutting deals. “Drug and insurance companies stand to benefit when tens of millions more Americans have coverage. So we’re asking them, in exchange, to make essential concessions to reform the system and help reduce costs. It’s only fair,” he said.

Seniors’ group welcomes pledge but still backs generics

The drugmakers’ pledge was also welcomed by seniors’ advocacy group the AARP (formerly the American Association of Retired Persons), whose chief executive, Barry Rand, stood beside Pres Obama as he formally announced the agreement at the White House on Monday.

“Today’s announcement will mean that struggling Americans who have been looking for help in their pocketbooks just to stay healthy, and who say that one of their single largest drivers of health care costs is prescription drugs...will have their brand-name drug costs cut in half. Too many Americans who fall into the coverage gap stop taking their medications because they simply cannot afford them. They will now have a new opportunity to lead a healthier life,” said Mr Rand.

However, he added that the AARP will continue to work to lower drug costs further, and yesterday (June 23) the group launched its Doughnut Hole Calculator, which aims to help seniors avoid falling into the Part D coverage gap “by switching to safe, less expensive medications.”

“Saving money on prescription drugs is going to mean pressing hard in Washington to close the doughnut hole; yesterday we were proud to help announce significant progress toward that goal,” said AARP executive vice president Nancy LeaMond.

However, she added: “in the meantime, we also want to give Americans the tools they need to cut their drug costs and stay out of the gap in the first place. We encourage every person in Medicare to take a few minutes to find the right drugs at the lowest prices.”

- For Part D beneficiaries, Medicare covers up to $2,700 in yearly prescription costs, and then stops; coverage starts again when costs exceed $6,100.