WASHINGTON - The pharmaceutical industry agreed yesterday to spend $80 billion over the next decade improving drug benefits for seniors on Medicare and defraying the cost of President Obama's health-care legislation, capping secretive negotiations involving key lawmakers and the White House.
"This new coverage means affordable prices on prescription drugs when Medicare benefits don't cover the cost of prescriptions," Sen. Max Baucus, Senate Finance Committee chairman, said in a statement announcing the accord.
The deal marked a major triumph for Baucus as well as the administration. Obama praised the deal.
"We are at a turning point in America's journey toward health-care reform," he said.
Baucus (D., Mont.) has been negotiating with industry groups for weeks as he tries to draft legislation that meets Obama's goal of vastly expanding health coverage, has bipartisan support, and does not add to the deficit.
Baucus' announcement said drug companies would pay half the cost of brand-name drugs for seniors in the so-called doughnut hole - a gap in coverage that is a feature of many of the plans providing prescription coverage under Medicare. Other officials said wealthier Medicare beneficiaries would not receive the same break, but there was no mention of that in the statement.
In addition, the entire cost of the drug would count toward a patient's out-of-pocket costs, meaning their insurance coverage would cover more of their expenses than otherwise.
Billy Tauzin, president and chief executive officer of the Pharmaceutical Research and Manufacturers of America, said: "Millions of uninsured and financially struggling Americans are depending on us to accomplish comprehensive health-care reform this year. Today, America's pharmaceutical research and biotechnology companies are signaling their strong support for these critically important efforts."
While none of the changes in the prescription drug program would directly lower government costs, several officials also said the industry agreed to measures that would give the Treasury more money under federal health programs. In particular, officials said drug companies would likely wind up paying higher rebates for certain drugs under Medicaid, the program that provides health care for the poor.
Those funds would be used to help pay for legislation expanding health insurance for millions who now lack it.
One official said the deal was agreed to late Friday night when Tauzin called Baucus. The senator's statement said the White House was involved in the agreement.
It was not clear what leverage the agreement would give Baucus with other health-care providers with whom he is in negotiations.