Democrats see drugmaker windfall from Medicare

WASHINGTON (Reuters) - U.S. pharmaceutical companies benefited from a $3.7 billion "windfall" during the first two years of Medicare's prescription drug coverage, according to a report from Democratic congressional staff released on Thursday.

The report from Democratic staff of the House Oversight and Government Reform Committee focused on "dual eligibles," or patients who qualify for prescription drug coverage from both Medicaid, which covers the poor, and Medicare, the health insurance plan for the elderly and disabled.

In 2006, six million eligible beneficiaries were shifted from Medicaid to Medicare's Part D prescription drug coverage, at a cost increase to taxpayers of 30 percent, according to the report. Medicare Part D offers prescription drug benefits through private health plans.

"The drug manufacturers have been paid billions more for the drugs used by the dual eligible beneficiaries than they would have been paid if the dual eligibles had continued to receive their drug coverage through Medicaid," Rep. Henry Waxman, a California Democrat and chairman of the committee, said at a hearing Thursday.

According to the report, Johnson & Johnson made over $500 million in additional revenues from sales of its anti-psychotic medicine Risperdal through Medicare, and Bristol-Myers Squibb made an additional $200 million from its anti-clotting drug Plavix.

The Republican committee members released their own report, arguing that reducing costs in Medicare Part D would only increase costs to other payers in the system, such as private employers and unions. In addition, the Part D program is operating below expected budget projections, said Rep. Tom Davis of Virginia, the committee's highest ranking Republican.

"Repeatedly making economically implausible arguments about the efficiency of government-run drug pricing, or plucking artificial windfalls from thin air, won't make Part D, a good program, work any better," Davis said.

Republicans also noted an 85 percent satisfaction rate among seniors with Medicare Part D as another measure of the program's success.

Richard Smith, senior vice president of policy and research for Pharmaceutical Research and Manufacturers of America, a lobbying group for drugmakers, said the Part D program had benefited seniors in many ways, including improved access to medicine, reduced out-of-pocket costs, and more choice among drugs.

"Changing Part D's competitive, market-based structure would undermine the carefully balanced approach that has produced sizable cost savings for Medicare beneficiaries and taxpayers and greatly improved access to needed medicines for seniors and disabled persons," Smith said.

Kerry Weems, acting administrator of Centers for Medicare and Medicaid Services, also defended the program.

"The success to date of the Medicare prescription drug benefit provides strong evidence that competition among private plans has contributed significantly to lowering both government and beneficiary costs compared to what was originally estimated," Weems said. Many beneficiaries "are experiencing added value through their Part D coverage in the form of effective, safety-promoting medication management programs."

(Reporting by Georgina Coolidge; Editing by Gary Hill)