Obama Targets Drug Companies for Cuts in U.S. Debt Talks
U.S. President Barack Obama
U.S. President Barack Obama speaks during a news conference at the White House in Washington, D.C. on July 15, 2011. Photo: Joshua Roberts/Bloomberg
U.S. President Barack Obama speaks during a news conference at the White House in Washington, D.C. on July 15, 2011. Photo: Joshua Roberts/Bloomberg
July 15 (Bloomberg) -- Al Hunt, executive editor at Bloomberg News, discusses President Barack Obama's news conference on U.S. debt-reduction plan negotiations. Hunt speaks on Bloomberg Television's "InBusiness With Margaret Brennan." (Source: Bloomberg)
Drugmakers led by Pfizer Inc. (PFE) and Merck & Co. were targeted for Medicare cuts by President Barack Obama as lawmakers push to agree on a deficit plan. The industry predicted “startling” job losses would result.
Pharmaceutical companies “are still doing very well through the Medicare program,” Obama said today at a news conference. “Although we have made drugs more available at a cheaper price to seniors who are in Medicare through the Affordable Care Act, there’s more work to potentially be done.”
The drug industry contributed $80 billion toward the cost of last year’s health-care law, helping Democrats make up for new spending in the bill. With cuts to Medicaid and Medicare on the table as part of deficit talks, the industry may have to give up more as an Aug. 2 deadline looms.
“It’s extremely unfortunate that President Obama continues to push for a policy that could destabilize the successful Medicare Part D program and have a devastating effect on American jobs,” said Karl Uhlendorf, vice president of the Pharmaceutical Research and Manufacturers of America, the drug industry’s Washington lobbying group. “Startling potential job losses could result from policy proposals that would undermine the business foundations of biopharmaceutical companies.”
Companies Targeted
The industry has already started rallying Congressional opposition to cuts. In a letter to House Speaker John Boehner, the Ohio Republican, and Democratic Leader Nancy Pelosi of California, 32 House members said they didn’t support drug discounts for Medicare patients who are poor enough to also qualify for Medicaid.
Medicare pays for drugs for this group, known as dual- eligibles, at higher prices than Medicaid would. A copy of the letter was provided by Pfizer spokesman Raul Damas.
The drug sector has already fired 118,000 workers since 2009, the manufacturers’ group said in the statement. Drugs such as New York-based Pfizer’s top-selling cholesterol pill Lipitor are coming off patents amid industry consolidation.
Cuts to drugmakers weren’t among as much as $353 billion in Medicare and Medicaid cuts on a list produced by House Majority Leader Eric Cantor, a Virginia Republican. Medicare is the U.S. health insurance program for the elderly and disabled, and Medicaid is the federal-state health plan covering the poor.
Drugmakers including Whitehouse Station, New Jersey-based Merck were targeted in Obama’s proposal this year that called for $200 billion in U.S. budget savings in a decade from the industry. Spending on drugs in Medicare totaled $55 billion in 2009, about 11 percent of the program’s total spending that year, according to the U.S Centers for Medicare and Medicaid Services.
Premiums on Wealthy
The Standard & Poor’s 500 Pharmaceuticals Index declined 0.5 percent to 324.88 at 4 p.m. New York time.
Obama also suggested requiring high-income beneficiaries pay more for Medicare premiums, saving as much as $38 billion, according to Cantor’s list.
“You can envision a situation where, for somebody in my position, me having to pay a little bit more on premiums or co- pays or things like that would be appropriate,” Obama said.
Medicare already charges 40 percent more to people who make in excess of $85,000 to get physician coverage. Seniors buying drug coverage who make more than $85,000 pay more as well, according to Medicare.
Obama is leading negotiations between Democrats and Republicans to raise the country’s legal borrowing limit before Aug. 2, when the administration says the government may no longer be able to pay its debts and would be in default. The parties haven’t announced any agreement about the size or details of a deal, or whether it will include tax increases Republicans have opposed.
To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net;
To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net.
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