Bloomberg News

Health Law’s Drug Discount Saves Elderly $1.5 Billion, U.S. Says

December 09, 2011

Dec. 6 (Bloomberg) -- President Barack Obama’s administration says the health-care overhaul he championed has this year saved Medicare recipients an average of $569 a person in drug costs.

About 2.65 million people ages 65 and older have spent about $1.5 billion less on prescription drugs under a discount program on medicines created by the law signed in March 2010, the Centers for Medicare and Medicaid Services said today in a statement. About 24 million beneficiaries in Medicare, the U.S. health program for the elderly and disabled, also had taken advantage of the law’s requirement for free preventive care, such as an annual checkup, during the first 11 months of the year, the agency said.

“Millions of Americans are receiving free preventive services and getting cheaper prescription drugs” because of the health law, said Marilyn Tavenner, the acting CMS administrator, in the statement.

The drug discounts apply to Medicare recipients who reach a coverage gap in the program’s prescription medicine plans called the “donut hole.” The law requires drugmakers to provide a 50 percent discount to people in the gap until they spend $4,550 a year, after which the government covers almost all drug costs. The discounts went into effect in January.

Drug companies agreed to the discounts in 2009 as part of an $80 billion contribution toward the cost of the measure. Beginning in 2014, about 32 million people who are now uninsured are expected to obtain taxpayer-subsidized health coverage including for prescription drugs.

Future Effects

The medicine discounts for seniors may eventually increase drug prices, and the free preventive care could drive up health spending without much benefit, said Joseph Antos, a health economist at the nonprofit American Enterprise Institute in Washington, D.C., who opposed the overhaul law.

“No company is in the business of handing out money,” he said today in a telephone interview. “To get the market back in equilibrium after this kind of a regulation, what happens is drug prices jump.”

Economic studies of preventive care have found the services often cost more money than they save unless “targeted on people highly likely to have some condition that could be detected and then could be treated,” Antos said.

--Editor: Andrew Pollack, Chris Staiti

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net


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