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Drug Companies and Private Insurance Companies Are Reaping Hefty Profits from Medicare Part D Around 90% of those eligible for Medicare Part D have enrolled in a drug plan and large pharmaceutical companies and insurers are reporting healthy increases in quarterly earnings. In early August, the Wall Street Journal attributed a 4.9% increase in prescription drug sales to Medicare Part D. This appears to a modest increase until its compared with profits reported by the drug companies. Novartis reported a second-quarter sales increase of 20% in the U.S. mostly due to sales of the hypertension medication Diovan. Pfizer reported that sales of the anticholesterol drug Lipitor increased 9% from a year earlier. GlaxoSmithKline reported a net income increase of 14% due, in part, to Medicare drug sales. The drug companies are benefiting from the shift of Medicaid patients to Medicare Part D. Medicaid negotiated prices with the pharmaceutical companies but the law which established the Medicare drug benefit prohibits such negotiation for the Part D drug plans. The biggest beneficiaries of Part D appear to be some of the private insurers that offer the drug plans. WellPoint Inc., the nation's largest insurer, with a reported enrollment of 1.5 million people in its Medicare plans, reported second-quarter profit gains of 34%. UnitedHealth Group Inc., and Humana Inc.have , together, at least half of all Medicare drug memberships. UnitedHealth reported profit gains of 26%. Humana reported a profit of 9.9% and revenue that jumped 52% over the same quarter last year. Many analysts are predicting that the huge profits may not continue due to intervention by the U.S. Congress which may pass legislation allowing Medicare to negotiate discounts on prescription prices. In 1997, the Balanced Budget Act curtailed Medicare payments to health plans. This resulted in a reduction of managed care companies in regions across the country. If history repeats itself, the number of Part D plans could be reduced and drug price controls may be put in place for Medicare.Created 9/3/06 |