Medicare Drug Prices and the Deficit

The President and Congress are trying to extract trillions of dollars in savings from the U.S. budget. The new Congressional “super committee” has been charged with cutting $1.5 trillion over the next 10 years. On September 19, 2011, President Barack Obama proposed $320 billion in health care savings over the course of a decade (see graph Proportions of Health-Related Savings from Various Sources Proposed by the Joint Select Committee on Deficit Reduction.). Central to that proposal is a plan to require that pharmaceutical manufacturers offer Medicare beneficiaries who qualify for low-income subsidies for prescription-drug coverage under Part D the same prices offered to the Medicaid program. This idea was also championed by the Simpson–Bowles Debt Commission and in legislation introduced by Congressmen Henry Waxman (D-CA) and Pete Stark (D-CA). The savings from this policy proposal is estimated to account for 42% of the total proposed health care savings, or $135 billion. (November 3, 2011)