PhRMA Statement on Part D Provision in Budget Deal

WASHINGTON, D.C. (February 8, 2018) – Today, Pharmaceutical Research and Manufacturers of America (PhRMA) President and CEO Stephen J. Ubl provided the following statement:

“Our industry has long supported efforts to make prescription drug coverage more affordable for Medicare Part D beneficiaries. Rather than prioritizing lowering seniors’ out-of-pocket costs, this proposal provides a massive bailout for insurance companies and undermines their incentive to reduce Part D costs, an incentive that has worked well for more than a decade.

“An analysis by Avalere estimates that the proposal will save Part D insurance plans over $40 billion – roughly 7 times what Medicare Part D beneficiaries will save from these changes. We should not give insurance companies billions of dollars in additional relief when they don’t share most of the discounts they currently receive with seniors at the pharmacy counter.

“Instead, Congress should use Part D savings to improve affordability and predictability for seniors, such as adding an out-of-pocket cap and giving seniors access to discounts at the pharmacy.”

Background on proposed Medicare Part D changes:

  • Medicare Part D is a successful program that relies on private market competition to hold down costs for seniors and taxpayers.
  • Private health insurance plans take on the financial risk of managing Part D costs and then compete for enrollment based on cost, coverage, quality and service. The competitive market in Part D has kept program costs low for more than a decade.
  • The legislation currently being debated by Congress includes a provision that would fundamentally alter the structure of the Part D program by reducing the financial incentives for insurance companies needed to keep program costs down and, therefore, undermine the whole purpose of having private sector delivery of program benefits.
  • The provision would significantly reduce health insurers’ responsibility for Part D costs between the initial coverage limit (approximately $3,700) and the catastrophic phase of the benefit – at which point insurance companies benefit from an incredibly generous federally-funded reinsurance program.
  • CMS and the nonpartisan Medicare advisors (MedPAC) have previously questioned whether insurance companies have the appropriate incentives to manage Part D program costs. This proposal would exacerbate the problem by reducing their liability even further, giving them even less incentive to effectively manage these costs. 

About PhRMA
The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country’s leading innovative biopharmaceutical research companies, which are devoted to discovering and developing medicines that enable patients to live longer, healthier, and more productive lives. Since 2000, PhRMA member companies have invested more than half a trillion dollars in the search for new treatments and cures, including an estimated $65.5 billion in 2016 alone.

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