Mixed views from PhRMA and GPhA on Obama's State of the Union Address

There were mixed reactions from two sides of the US drug industry - research-based and generic drugmakers – to this week’s State of the Union message from President Barack Obama. In his annual State of the Union speech on Tuesday, Pres Obama said he would "reduce taxpayer subsidies to prescription drug companies" to rein in the rising cost of Medicare, the $600 billion health care program for the elderly and disabled.

The Congressional Budget Office estimates that requiring rebates for dual eligibles would save $137 billion in Medicare spending. Often the oldest and sickest beneficiaries, dual eligibles account for fewer than 20% of Medicare beneficiaries, but more than 30% of program spending, noted a Reuters report. Damien Conover, an analyst with the Morningstar investment research firm, quoted by Reuters, said requiring Medicaid-level rebates for dual eligibles could trim 2% to 7% from the profits of drug manufacturers.

For its part, Pharmaceutical Research and Manufacturers of America (PhRMA) senior vice president Matthew Bennett stated: “The President has again proposed to upend the successful Medicare Part D prescription drug program by imposing government price controls on it. The facts about Part D are simple and do not support this radical proposal: Part D succeeds for seniors and taxpayers because it’s built on effective competition and the savings negotiated by large powerful private plans—the same plans used by private employers and insurers—on behalf of seniors and taxpayers.”