Drug Companies Making Billions in Excess Profits Under Medicare Plan
For Immediate Release: August 15, 2006
Contact: Lynn Erskine, 202-293-5380 x115
Washington, DC: Pharmaceutical companies are making
billions in excess profits under the new Medicare drug benefit,
according to a report by the Center for Economic and Policy Research.
In the first year of the Medicare Part D program, Pfizer will make $1.2
billion in excess profits on Lipitor and $585 million on Zoloft; Wyeth
will make nearly $1 billion on Protonix; and Merck will make $1.6
billion on Zocor.
The report, The Origins of the Doughnut Hole: Excess Profits on Prescription Drugs,
by economist Dean Baker, calculated the difference between the average
cost of 20 common drugs used by seniors and the cost when obtained
through the Veterans Administration. It found excess profits totaling
more than $7 billion in the first year of the program. The study also
calculated prices for prescription drugs such as Actonel, Aricept,
Celebrex, Fosamax, Nexium, Norvasc, Plavix, Prevacid, Toprol XL, and
Thousands of drugs cost more than necessary under the Medicare drug
plan because Congress prohibited Medicare from negotiating drug prices
directly with the pharmaceutical industry, as is done by the Veterans
Administration. In the case of many drugs, the prices paid by insurers
participating in the plan are more than twice as high as the prices
paid by the Veterans Administration.
Millions of seniors and disabled Americans enrolled in Medicare Part D
drug plans are discovering the "doughnut hole" - the $2,850 gap placed
into the plan in order to save the government money. The Center for
Economic and Policy Research has pointed out that this gap was only
necessary because the plan's overall design added significant costs and
"The excess profits from just a small number of drugs account for a
very large portion of the doughnut hole," said Baker. "The excess
profits for the drug industry as a whole will be close to $50 billion
in the first full year of Medicare drug benefit program. This is more
than twice the size of the doughnut hole."