Pharmaceutical Industry Pledges $80 Billion To Reduce Cost of Drugs

Barack Obama on Monday welcomed the pharmaceutical industry's agreement to help close a gap in Medicare's drug coverage, calling the pact a step forward in the push for overhaul of the nation's health care system.

Drug companies have pledged to spend $80 billion over the next decade to help reduce the cost of drugs for seniors and pay for a portion of Obama's health care legislation. The agreement with the pharmaceutical industry would help close a gap in prescription drug coverage under Medicare.

Obama stated the move on Medicare will help correct an anomaly in the program that provides a prescription drug benefit through the government health care program for the elderly and disabled. Under the deal, drug companies will pay part of the cost of brand name drugs for lower and middle-income older people in the "donut hole".

Part of the $80 billion would be used to halve the cost of brand name drugs for Medicare recipients when they are in a coverage gap of the program. AARP, which represents 40 million older Americans, has lobbied to eliminate the "donut hole" completely.

This deal would affect about 26 million low and middle income recipients and apply to brand name and biologic drugs, but not generic. This would likely take effect in July 2010.