White House Can't Explain More Than Half of $80 Billion in Drug Savings

The Obama White House cannot explain more than half of today's announced $80 billion in prescription drug savings.

A senior official said the White House estimates $30 billion in savings will be achieved through drug companies reducing by at least 50 percent the cost of brand-name prescription drugs for Medicare beneficiaries who fall into the so-called coverage "donut hole."

The other $50 billion in savings will come from unspecified and unknown changes to drug costs linked to Medicare and Medicaid.

The $80 billion in savings is a 10-year estimate.

White House Press Secretary Robert Gibbs said Monday details on non-donut hole savings remain to be negotiated between the drug companies and the Senate Finance Committee.

"They're still continuing to work through some of the details on that," Gibbs said. "Some portion of this is going to go to the pharmaceutical interest -- industry, making good on the savings proposals that the president has outlined to make health care more efficient, which will impact the amount that the government pays."

But White House officials could not explain what drug companies will do to improve efficiency or how the drug companies will provide, on average, $5 billion in savings each year by giving Medicare or Medicaid lower prescription drug costs.

The "donut hole" refers to a coverage gap in Medicare Part D. This year, the "donut hole" provides no reimbursement for drug costs between $2,700 and $6,154. After deductibles are covered, Medicare covers 75 percent of prescription drug costs up to $2,700. All costs above $6,154 receive 100 percent coverage.

The deal with drug makers will provide name-brand prescription drugs at half price or cheaper to the roughly 3.5 million Medicare beneficiaries projected to fall into the "donut hole" this year.

This aspect of the drug maker arrangement with the White House will not save the government any money -- all savings will accrue to the seniors in the "donut hole." According to a Kaiser Foundation study in 2008, about 500,000 Medicare beneficiaries -- or 15 percent -- stop using their prescription drugs when they fell into the "donut hole."

"It's a major relief to millions of Medicare beneficiaries," said John Rother, executive vice president of AARP. "In addition to the financial benefits, which are considerable, this could literally save lives because many people stop taking their medication today when they enter the 'donut hole'."