Drug makers admit they’ve taken too much money

By agreeing to cut prices by $80 billion over the next 10 years to close the Medicare Part D prescription drug doughnut hole and help pay for health care reform, the major pharmaceutical companies have admitted that they’ve been raking in way too much money.

The drug manufacturers, organized as the Pharmaceutical Research and Manufacturers of America (PHARMA), have agreed to a minimum 50 percent discount for most Medicare beneficiaries for brand-name medicines purchased in the doughnut hole gap in Part D coverage, roughly between $2,700 and $6,100 a year.

The doughnut hole came into existence when former President George W. Bush and his fellow Republicans designed Part D to benefit pharmaceutical and insurance companies more than the elderly Americans who need the coverage. At the same time, the federal government was barred from negotiating drug prices in bulk with the pharmaceutical companies.

The $80 billion commitment, part of $2 trillion in health care cost cuts sought by President Barack Obama over the next 10 years as part of the health care reform effort, shows how excessively profitable the pharmaceutical industry has become.  Even so this represents only 4% of the targeted reduction.  In Canada, where the government negotiates drug prices as part of a Single Payer arrangement, American made medicines are considerably cheaper.

The 30 percent overhead for private health insurance is  the other big area for cost cutting. Eliminating these middle men through a Single Payer arrangement or Obama’s public health insurance option is the best way to achieve universal coverage at the least cost. Every other industrialized country has already shown the way.

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