[Ip-health] CEPR: MERCK, PFIZER, WYETH MAKING BILLIONS IN EXCESS PROFITS THROUGH MEDICARE DRUG PLAN

[robert weissman]

Press Release

MERCK, PFIZER, WYETH MAKING BILLIONS IN EXCESS PROFITS
THROUGH MEDICARE DRUG PLAN

For Immediate Release: August 15, 2006

Contact: Lynn Erskine, 202-293-5380 x115


Washington, DC: Pharmaceutical companies are making billions in excess
profits under the new Medicare drug benefit, according to a report by
the Center for Economic and Policy Research. In the first year of the
Medicare Part D program, Pfizer will make $1.2 billion in excess profits
on Lipitor and $585 million on Zoloft; Wyeth will make nearly $1 billion
on Protonix; and Merck will make $1.6 billion on Zocor.

The report, "The Origins of the Doughnut Hole: Excess Profits on
Prescription Drugs," by economist Dean Baker, calculated the difference
between the average cost of 20 common drugs used by seniors and the cost
when obtained through the Veterans Administration. It found excess
profits totaling more than $7 billion in the first year of the program.
The study also calculated prices for prescription drugs such as Actonel,
Aricept, Celebrex, Fosamax, Nexium, Norvasc, Plavix, Prevacid, Toprol
XL, and Xalatan. To read the report, see:
http://www.cepr.net/publications/part_d_drug_profits_2006_08.pdf

Thousands of drugs cost more than necessary under the Medicare drug plan
because Congress prohibited Medicare from negotiating drug prices
directly with the pharmaceutical industry, as is done by the Veterans
Administration. In the case of many drugs, the prices paid by insurers
participating in the plan are more than twice as high as the prices paid
by the Veterans Administration.

Millions of seniors and disabled Americans enrolled in Medicare Part D
drug plans are discovering the "doughnut hole" - the $2,850 gap placed
into the plan in order to save the government money. The Center for
Economic and Policy Research has pointed out that this gap was only
necessary because the plan's overall design added significant costs and
complexity.

"The excess profits from just a small number of drugs account for a very
large portion of the doughnut hole," said Baker. "The excess profits for
the drug industry as a whole will be close to $50 billion in the first
full year of Medicare drug benefit program. This is more than twice the
size of the doughnut hole."

The Center for Economic and Policy Research is an independent,
nonpartisan think tank that was established to promote democratic debate
on the most important economic and social issues that affect people's
lives. CEPR's Advisory Board of Economists includes Nobel Laureate
economists Robert Solow and Joseph Stiglitz, and Richard Freeman,
Professor of Economics at Harvard University.

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