The price of drugs is going up. Prescription drug costs rose at a faster rate than costs for other medical goods and services over the last four years by an annual average of 6.6% from 2006 through the first quarter of 2010, compared with a 3.8% average annual increase in the consumer price index for medical goods and services. Prices for the brand-name drugs increased by an annual average of 8.3%, while prices for the generics fell by 2.6% each year.
Americans spent $250 billion on prescription drugs in 2009, of which $78 billion or about 31% of it was paid for by the federal government.
Democrats in Washington D.C. used these findings to praise the provisions included in the reform law. Representative Pete Stark, a ranking member of the House Ways and Means Subcommittee on Health comments on this new information:
"This report reminds us that this is an area where we should be looking for savings for taxpayers and beneficiaries."
Some media reports have suggested that prescription drug prices may have increased more during the debate leading up to passage of the Patient Protection and Affordable Care Act (PPACA) in March 2010 compared to other recent years. Congress commissioned the Government Accountability Office to provide information on the extent to which prices for individual brand name drugs changed over the years.
California Democrat Henry Waxman, ranking member of the House Energy and Commerce Committee, also commented:
"Congress needs to investigate and stop drug companies from overcharging seniors. This new report also shows the importance of the benefits we provided to seniors when we closed the Part D drug donut hole in the health care reform law. Now thanks to the health care reform law, the average senior who hits the drug donut hole will get some protection from drug price hikes and save over $500 in 2011."
The Patient Protection and Affordable Care Act (PPACA) is a federal statute that was signed into United States law by President Barack Obama on March 23, 2010. This Act and the Health Care and Education Reconciliation Act of 2010 (signed into law on March 30, 2010) made up the health care reform of 2010. The laws focus on reform of the private health insurance market, provide better coverage for those with pre-existing conditions, improve prescription drug coverage in Medicare and extend the life of the Medicare Trust fund by at least 12 years.
The PPACA passed the Senate on December 24, 2009, by a vote of 60 to 39 with all Democrats and Independents voting for, and all Republicans voting against. It passed the House of Representatives on March 21, 2010, by a vote of 219 to 212, with all 178 Republicans and 34 Democrats voting against the bill.
The law however has already received legal challenges regarding its constitutionality. Three cases in federal courts upheld the constitutionality of the bill while two deemed it unconstitutional. Six other challenges were dismissed on grounds such as plaintiffs being unable to demonstrate sufficient standing. The Supreme Court is expected to continue reviewing the law this year.
The Act's provisions are intended to be funded by a variety of taxes and offsets. Major sources of new revenue include a much-broadened Medicare tax on incomes over $200,000 and $250,000, for individual and joint filers respectively, an annual fee on insurance providers, and a 40% tax on "Cadillac" insurance policies. There are also taxes on pharmaceuticals, high-cost diagnostic equipment, and a federal sales tax on indoor tanning services. Offsets are from intended cost savings such as improved fairness in the Medicare Advantage program relative to traditional Medicare.
Total new tax revenue from the Act will amount to $409.2 billion over the next 10 years. $78 billion will be realized before the end of fiscal 2014.
Source: The U.S. Government Accountability Office
Written by Sy Kraft, B.A.