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JULY 22, 2002
4:46 PM
CONTACT:  Health Reform Program - Boston University School of Public Health
Alan Sager, Ph.D. 617/ 638-4664 or
Deborah Socolar, MPH 617/ 638-5087
Affordable Medicare Drug Plan Unveiled at Boston Congressional Hearing

BOSTON - July 22 -At a congressional hearing in Boston today, a Boston University School of Public Health professor unveiled a comprehensive Medicare prescription drug plan that employs new cost-cutting and financing methods to make it affordable for both patients and the federal treasury.

Alan Sager, Ph.D., director of the Health Reform Program at BU's School of Public Health, outlined the new plan that would cover all drugs, with modest co-payments of $5 or $10 per prescription. It would hold new federal costs below $400 billion through 2011, yet protect drug makers' current profit levels and ability to finance research.

With comprehensive drug coverage, Medicare patients could fill many prescriptions that they are currently unable to afford. Manufacturing the added volume of pills would cost far less than today's prices. Instead of paying high list prices, Medicare would cover drug makers' actual cost of manufacturing the increased volume of pills. Sager estimates this measure would save over $400 billion in 10 years. "Drug manufacturers would not earn windfall profits on the higher volume, but their profits would not fall either," he says.

Sager proposes launching a federal effort to develop and distribute reliable evidence on drug effectiveness, safety and cost. This would encourage quick adoption of breakthrough drugs and discourage use of costly drugs that lack added benefits.

"With drug makers' profits protected, they would not need to waste a projected $410 billion on marketing and advertising over the next ten years," says Sager. Re-directing that money would help finance both the drug coverage and the new drug information initiative.

Premiums would typically run about $20 per month, on a sliding scale based on individuals' Social Security checks. Patients' only costs would be premiums and co-payments, and both would be scaled to income.

"Patients are not forced to choose among costly and inadequate benefit packages," says Sager. "Instead, they would pay little for one benefit package that offers freedom of choice of all medications."

Sager notes that the Department of Veterans Affairs' experience with prescription drug purchasing has shown that winning lower prices is a far more effective way to contain cost than is restricting use of drugs.

The new program is designed to capture and pool some existing spending for prescription drugs for Medicare patients. "This would freeze the contributions of state Medicaid programs and private employer retiree plans at 2002 levels, relieving them of a soaring cost while helping to help finance the new benefit," says Sager.

The plan would allow for an 8.5 percent annual rise in Medicare prescription drug spending, before counting the cost of the increase in medication use when patients gain coverage. "Such a limit is essential to make drugs affordable," says Sager, "and it can be achieved while assuring access to all needed medications, yet preserving manufacturers' returns on equity and funding for research."

U.S. Representative John Tierney and the National Security and Veterans Affairs Subcommittee of the House Government Reform Committee sponsored the hearing at the McCormack Court House.

The complete testimony is available on the internet at

Note to editors: The complete testimony is now available on the internet at (on the US Health Reform page, as a PDF file posted under "Testimony") and it can also be reached with this direct link: Crafting an Affordable Medicare Prescription Drug Benefit: Lessons from the Veterans Administration Experience, U.S. House Government Reform Committee, Subcommittee on National Security and Veterans Affairs, 22 July 2002.

Or for a faxed or mailed hard copy, please call Alan Sager 617/ 638-4664, or Deborah Socolar 617/ 638-5087.


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