These officials said the 10-year proposal under discussion would have drug firms pay as much as half of the cost of brand-name drugs for lower and middle-income seniors in the so-called “doughnut hole.”
Medicare patients with incomes up to about $80,000 would realize some benefit. The term “doughnut hole” refers to a feature of the current drug program that requires beneficiaries to pay the entire cost of prescriptions after initial coverage is exhausted but before catastrophic coverage begins.
Additionally, officials said any agreement would reduce anticipated payments for the pharmaceutical industry under government-run health programs such as Medicare and Medicaid. The government would use those savings to help pay for legislation expanding health insurance to millions who now lack it.
One official close to the talks said agreement had been reached, but there was no immediate confirmation. All officials spoke on condition of anonymity to discuss private negotiations.
Nor was it known whether other elements might be envisioned that could ease the sting for the industry.
Any agreement with Pharmaceutical Research and Manufacturers of America, or PhRMA, which represents drug companies, would mark a major accomplishment for Sen. Max Baucus, the chairman of the Senate Finance Committee, who is attempting to draft legislation that can command bipartisan support in Congress. The Montana Democrat has been negotiating with several outside interests — hospitals, doctors and insurance companies among them — in hopes they would accept lower-than-planned payments from government-run health care programs. A deal with drugmakers would presumably increase pressure on other groups to do the same.
It would also counter a recent series of stumbles that, while common with any major legislation, have contributed to the impression that the drive to enact health care legislation was sputtering.
Ken Johnson, senior vice president of the PhRMA, declined to comment, except to say, “We remain committed to comprehensive health care reform and we are still in discussions with the administration and congressional leaders about ways we can make a positive contribution to this important effort.”
The industry is under pressure, particularly in the House, where senior Democrats are considering legislation that could cut more deeply than drug companies would accept on their own. Additionally, some lawmakers have sought for years to permit the importation of prescription drugs from Canada and other countries, a step the industry has fought and was able to fend off while Republicans controlled Congress.
Rep. Henry Waxman, D-Calif., chairman of the Energy and Commerce Committee, said during the day drug makers reaped a “windfall of billions of dollars” from the Medicare prescription benefit and Congress wants some of it back. He was referring to seniors who had been covered under Medicaid, which requires rebates from drugmakers. Many were switched to Medicare, which does not.
Obama has called for $75 billion worth of savings in government payments to drug companies from Medicare and Medicaid over the next decade to help pay for his health legislation, which he says must not add to the deficit.
Under the drug program for Medicare, which began in 2006, most plans included a gap in coverage. Under a standard plan in effect, the benefit covered costs until the beneficiary and government together had spent $2,250. At that point, beneficiaries had to pay all their drug costs until their out-of-pocket costs reached $5,100 for the year. Benefits then resumed, paying 95 percent of any additional expenses.
Republicans and the Bush administration, who designed the program, created the “doughnut hole” to hold down the government’s cost.
Democrats attacked the bill, taking particular aim at the doughnut hole, and pledged to narrow or close it if they won a majority. Even so, they made no concerted effort to do so after winning majorities in the 2006 elections.
But now, many leading Democrats have vowed to make better Medicare prescription drug coverage a part of a health care overhaul.