Deal reached to cut US Medicare drug costs -source

WASHINGTON, June 20 Sat Jun 20, 2009 1:01pm EDT

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WASHINGTON, June 20 (Reuters) - Drug manufacturers have agreed to offer some $80 billion in prescription drug discounts for Medicare recipients, an industry official said on Saturday, key savings as President Barack Obama pushes to overhaul the $2.5 trillion U.S. healthcare system.

The companies have agreed to a 50 percent discount for those elderly and disabled Americans in the Medicare health insurance program who face a gap in coverage after their drug costs reach a certain level, known as the "doughnut hole".

"This is a huge amount of money that our companies are putting up to try to help make healthcare reform possible," said an industry official familiar with the negotiations, declining further identification.

The 10-year deal was negotiated between the Pharmaceutical Research and Manufacturers of America industry association and the Senate Finance Committee, which is one of several congressional panels drafting healthcare reform legislation.

Costs for healthcare has soared faster than the inflation rate and the Democratic president has pledged to work to curb those costs as well as find a way to provide coverage to the 46 million uninsured Americans.

The White House has said some $950 billion in cuts have been found to cover its reform efforts but there are reports that the costs could reach as much as $1.6 trillion and still not cover everyone, setting off a fierce debate on how to close the gap.

That has given Republicans an opening to attack, particularly since Americans are growing worried about the eye-popping record budget deficits facing the country -- more than $1.8 trillion in fiscal 2009 alone.

It was not immediately clear when a formal announcement of the Medicare deal would be made. The deal was reported earlier by The Washington Post.

Spokesmen for the White House and Senate Finance Committee were not immediately available for comment and a representative for the pharmaceutical association declined to comment. (Reporting by Jeremy Pelofsky; editing by Mohammad Zargham)

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