Bloomberg analysis finds 'doughnut hole' deal to cost drugmakers less than 1% of profits

News outlets report how closing the Medicare 'Doughnut Hole' affects drugmakers and seniors.

Bloomberg: "Drugmakers led by Pfizer Inc., AstraZeneca and Bristol-Myers Squibb Co. may provide more than $2 billion in drug discounts to senior citizens next year under a deal pharmaceutical companies made with the White House, according to data compiled by Bloomberg." The data came from a recent report released by Medicare. "Pfizer, the world's largest drug company, will cede less than half of 1 percent of its $50 billion in annual revenue under the arrangement." Les Funteyder, a health care analyst in New York, calls it "a good deal for pharma."

The arrangement "provides Medicare beneficiaries who fall into a coverage gap known as the 'doughnut hole' 50 percent off brand-name medications. Worldwide sales by brand-name drugmakers in 2008 totaled $288 billion, according to data from the drug industry's trade association." As part of the deal struck between Democrats and drugmakers, "In return for providing the price breaks and other concessions, pharmaceutical companies avoided policies such as allowing importation of drugs and having the government negotiate drug prices for Medicare beneficiaries" (Armstrong, 10/1).

In a reported column, NorthJersey.com explains the seniors' perspective: "Over time, the Affordable Care Act will close the doughnut hole entirely. In 2011, pharmaceutical companies will provide a discount of 50 percent on brand-name drugs to low- and middle-income beneficiaries who find themselves in the gap. Then, the doughnut hole itself will shrink a bit every year, ultimately disappearing entirely in 2020. But for starters, doughnut-hole victims get a one-time, tax-free $250 rebate check this year" (Miller, 10/1).

Meanwhile, in a second story, Bloomberg reports that "Wal-Mart Stores Inc., the world's largest retailer, said it will team with health insurer Humana Inc. to offer the cheapest prescription drug plan in the U.S., as the companies seek to take sales of medications from rivals. The companies will begin marketing the plan today to Americans in Medicare ..., William Fleming, a Humana vice-president, said in a conference call yesterday. The policies, which take effect Jan. 1, will cost $14.80 a month, less than half the average premium this year, and will boost sales for both companies" (Nussbaum and Boyle, 10/1).