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
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
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 www.healthreformprogram.org.
Note to editors: The
complete testimony is now available on the internet at www.healthreformprogram.org
(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.