WASHINGTON, D.C– U.S. Senator Angus S. King, Jr. (I-ME) today joined Senator Jay Rockefeller (D-WV) and 17 other colleagues in introducing legislation to significantly reduce the deficit, better protect seniors’ health care, and reduce Medicare Part D drug costs for taxpayers. The bill would save $141.2 billion, helping to responsibly reduce the deficit, and avoid reckless proposals to cut Medicare benefits.

“The Medicare Drug Savings Act presents a responsible and common-sense way for Congress to begin regaining control of increasing government expenditures in healthcare, which are the primary source of future deficits,” said Senator King. “This legislation would not only continue to protect seniors’ health care in Maine, but it would also save taxpayers an estimated $141.2 billion over the next ten years.”

The Medicare Drug Savings Act would eliminate a special deal for brand-name drug manufacturers that allows them to charge Medicare higher prices for prescription drugs for some seniors and people with disabilities, including about 97,000 Mainers.  The bill would require drug companies to provide rebates to the federal government on drugs used by dual eligibles – people eligible for both Medicare and Medicaid, who are predominantly low-income seniors – just as was done for dual eligibles on Medicaid before Medicare Part D was created in 2006. 

With the exception of Medicare Part D, all large purchasers of prescription drugs negotiate better prices, including Medicaid and private insurers.  This bill simply restores negotiated prices for low-income Medicare beneficiaries.

This bill would correct excessive payments to drug companies, while also saving taxpayers and the federal government from footing the unnecessary cost.  Over the past ten years, the 11 largest drug companies alone took $711.4 billion in profits, including a 62 percent increase from 2003 to 2012. 

BACKGROUND:The Medicare Drug Savings Actwould reduce the deficit, saving taxpayers $141.2 billion over the next ten years, according to the Congressional Budget Office.  Similar proposals were also included in the President’s most recent budget proposal and the President’s Commission on Fiscal Responsibility and Reform.

The legislation would require prescription drug companies to provide a rebate for drugs provided to almost 97,000 Mainers eligible for both Medicare and Medicaid or otherwise eligible for the low-income-subsidy plan in the Medicare Part D Prescription Drug Program.  Drug manufacturers currently provide rebates for other Medicaid beneficiaries, and had previously provided the same rebates for dually eligible beneficiaries.

Before the Medicare prescription drug program was created in 2006, brand-name drug manufacturers paid rebates for dually eligible beneficiaries on Medicare and Medicaid.  All dual eligibles’ prescription drugs were discounted by rebates negotiated by the federal government and some received additional discounts negotiated by state Medicaid plans.  But since Medicare Part D was created, drug companies no longer had to provide these rebates and they have been unfairly making more money off of prescription drugs for dual eligibles at the taxpayers’ expense.  The bill retains incentives for drug manufacturer innovation and would not impose price controls.

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