Medical Firms Like Medicare Drug Plan; But They Add A Big "If'; They want a program built on private plans and not price controls.(A)

Byline: GLORIA LAU

Go figure. Just as the finances of Medicare start to deteriorate again, the push is on to give its elderly clients a new drug benefit. The latest annual report released by trustees of the program says Medicare is expected to become insolvent in 2026. That's been moved up since last year, when the same group's report forecast it would go broke in 2030. The president has proposed a new drug benefit for seniors. His plan would cost $400 billion over 10 years, but reform Medicare somewhat by encouraging the elderly to join HMOs and other cost-controlled insurance programs. Today 38% of seniors don't have drug coverage. The rest get drug insurance through their employers or Medigap coverage -- insurance that seniors buy to fill in where Medicare doesn't. Drug and medical companies hope Congress will create a federally funded drug insurance program. Larger numbers of seniors on Medicare mean firms will enjoy greater overall sales, even if Medicare demands discounts. A Medicare drug subsidy also means seniors without drug insurance today would have money to spend on drugs in the future.

"Schering-Plough supports a Medicare prescription drug benefit," said spokesman William O'Donnell. "We believe a prescription drug benefit should be funded by a federal subsidy to Medicare beneficiaries who purchase benefits through the private sector."

Merck's Chris Loder echoes that view, saying Merck supports drug coverage where seniors would choose from "qualified private sector health plans that rely on market competition, not government price controls."

Neither Schering nor Merck would discuss the potential impact of any reform.

Most major Medicare proposals from Congress and the president have asked that Medicare's money be handed to private companies -- health plans and pharmacy benefit managers (PBMs), who will administer the benefits.

"What you want to do is create vibrant competition for prescription drugs among the manufacturers, and a PBM can do that," said Barrett Toan, chief executive of Express Scripts, a pharmacy benefit manager.