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Over 70 million Americans, one in four, have no or inadequate prescription drug coverage. Of those, 13 million senior citizens and people with disabilities who are Medicare beneficiaries have no outpatient drug coverage. Millions of other older adults have inadequate or insecure drug coverage with high deductibles and co-payments and low annual caps. Moreover, Medicare HMOs and employer plans are reducing drug coverage or raising costs for retirees.
In the D.C. metropolitan area at least 127,000 seniors have no prescription drug coverage and thousands of other consumers have no or inadequate coverage. Meanwhile, prescription drug costs are increasing 15-20% a year, breaking the budgets of many families or forcing people in need to go without their medications. Instead of offering most favored prices to Medicare beneficiaries -- because of their huge collective buying power -- as the drug companies do to veterans through the Veterans Department, the companies price gouge uninsured seniors and people with disabilities by charging them their highest retail prices.
The pharmaceutical industry profits handsomely from price gouging. For decades, brand name prescription drug makers have consistently been among the most profitable industries in America. In 1999, the drug industry ranked first among all industries in rates of return on equity, assets, and revenues. Despite these high profits, the prescription drug industry pays 40% less in federal taxes than other major industries. Moreover, CEOs of the top twelve pharmaceutical companies last year averaged $18 million in annual compensation, including stock options, and now hold more than $840 million in unexercised stock options.
The drug industry claims that high U.S. prescription drug prices are necessary to fund research and development. But European countries, which sell the same drugs for a fraction of the U.S. price because their governments negotiate fair prices with prescription drug makers, have produced 60% more new drugs than the United States since 1975. In fact, R&D is a lower priority than profits for drug companies. For instance, in 1999, the top twelve firms put nearly 50% more revenue into profits than put into R&D.
Congress has been debating how to best provide seniors with prescription drug coverage and whether to rein in skyrocketing drug prices. President Clinton and House Minority Leader Gephardt (D-MO) have proposed expanding Medicare to include comprehensive prescription drug coverage, much like the program now provides hospital and physician coverage. However, Rep. Bill Thomas (R-CA) and House Republican leaders passed a bill along party lines that would rely less on Medicare and more on the private insurance industry to offer drug insurance plans and encourage beneficiaries to join HMOs and other managed care plans to get coverage.
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