Shuffling the poor to Medicare�s Plan D will net Big Pharma billions
By Jerry Mazza
Online Journal Associate Editor

Jul 21, 2006, 00:52

New profits for Big Pharma, estimated at $2 billion or more this year, will come from the transfer of millions of low income and poor folks to Medicare�s new Part D (for dumb) that went in effect in January 2006, as reported in The New York Times.

Thanks to George Bush and Company, under Part D the prices insurers will pay for medications given to poor and disabled people transferred from Medicaid will be a hell of a lot higher than Medicaid would have paid, a program created originally for the poor. Nice work, fellas. You�ve guaranteed your 2006 campaign contributions.

In fact, some 6.5 million low-income old or disabled poor folks were shoveled into the Part D Medicare program for drug coverage to provide this strong dose of corporate welfare. Since all others needs of these recipients are still covered by Medicaid, the transferees are called dual eligibles, as if they were being given more, not short-changed in the long run.

The scam is that drugs tend to be cheaper under the Medicaid program because the states and buyers receive the lowest available prices by law. And you may remember, Bush wouldn�t allow Medicare to bargain with Big Pharma to get the lowest possible prices. Why on earth would he want Medicare pay the higher prices if not to line neocon pockets?

Ergo, since Park D (for even dumber) went into effect, Big Pharma has shamelessly hiked prices of their brand-name drugs an average of 3.6 percent. Although the actual amount spent relies on what each of the 81 Part D insurers work out, count on costs for those 6.5 million dual eligible people�s drugs to go up, and the difference being sucked up by federal taxpayers. Isn�t it good to know DC is always thinking of us, and how they can pick our pockets as well as the bones of the poor?

This particular piece of corporate welfare was brought to you by a provision of the 2003 Medicare law that exempts Part D drugs, as mentioned, from �best price� rebates. The drug makers have been mandated to give the state Medicaid agencies those rebates since 1991. When smart people ran the government, those rebates were meant to insure that state agencies got the every day low price.

With Medicaid, federal and state government paid more than $14 billion each year for the drugs of those 6.5 million transferred recipients. Without the best-price rebates, the bill would have been 25 percent higher, about $17.5 billion.

Now nobody�s sure what the complete drug tab will be for those people shifted into Part D, though everybody knows it will be higher. Medicare, they say, won�t have real numbers until it chews up hundreds of monthly reports that the plans in the Part D web must file.

Nevertheless, the profits off the backs of dual-eligibles are already being seen by Big Pharma, amounting to double-digit increases in specific drugs used heavily by Medicaid patients. Like Lamictal, an antipsychosis drug from GlaxoSmithKline, up 33 percent in sales to $305 million in just the first quarter. Seroquel, an antipsychotic drug from AstraZeneca, zoomed up 29 percent to $590 million. Sales of Plavix, a blood thinner from Bristol-Myers Squibb, were up 26 percent to $850 million.

Lamictal and Seroquel are major drugs in the Medicaid programs, prescribed for bipolar disorder and other mental health problems, not exactly minor issues.

Sadder, some two million of the people passed into Part D are both disabled and younger than 65. More than half of them have mental health problems. I wonder if there�s a correlation for a study right there. In fact, Medicaid patients made up for 80 to 90 percent of the total market for these �high-end� antipsychotic drugs.

The Medicaid best-price rebates cut some 15 percent off Big Pharma's list prices. California, New York and Maine managed even larger rebates. Now, with Part D, price wheeling and dealing will be done by Medicare drug plans of all sizes. In the true style of Bush administration circumspection, prices will be given to Medicare, but under a lobbyist-touted provision they will be kept secret to all others. That gives you a feeling of confidence, doesn�t it?

On top of that, the federal agency that oversees Medicare and Medicaid is requiring that states return a total of $5.8 billion to Washington from federal funds given to the Medicaid program. That�s the number that the agency estimates states will be saving since they�re no longer providing drugs to dual-eligibles.

But the states regard these refunds as �clawbacks,� and do not agree with the federal formula to arrive at the repayment numbers. Given the administration�s history with fuzzy math, from Iraq budgets to the budget deficits, not to mention tax cuts to the rich or the bogus claims of Social Security bankruptcy, I would put my money on the states� claims of �clawbacks.�

Nevertheless, surprise, surprise, the Supreme Court brusquely nixed hearing a case filed by the the attorneys general of Texas and four other states that sought to bury the repayment formulas as unconstitutional. The states' position is that the federal formula is using higher drug costs that many Medicaid programs have actually been spending. In other words, the feds are fudging the numbers upwards.

And so, here are Medicare and Medicaid government agencies nickel-and-diming the states over monies for drugs for the poor, the aged, and disabled, while the market for Part D dual-eligibles is looking swimmingly lucrative for Big Pharma. And so take a minute and scream with me. Maybe DC will hear us: the well-being of the most vulnerable is not the place to cut. Cuts should come from the gluttonous military industrial complex and tax cuts for the rich (to mention a few) that are sucking America�s blood dry. That�s my humble prescription for a healthier society.

Jerry Mazza is a freelance writer living in New York City. Reach him at

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