new Medicare prescription benefit is proving to be a financial windfall larger than even the most optimistic Wall Street analysts had predicted

As Drug Prices Climb, Democrats Find Fault With Medicare Plan | By ALEX BERENSON
Published: November 6, 2006

For big drug companies, the new Medicare prescription benefit is proving to be a financial windfall larger than even the most optimistic Wall Street analysts had predicted.

But those gains may come back to haunt drug makers if Democrats take control of Congress this week.

Democrats, who have long charged that the drug industry is profiteering at taxpayers’ expense, say they want to introduce legislation to revoke the law that bars Medicare from negotiating prices directly with drug makers like Pfizer for the medicines it buys.

Medicare now pays for drugs indirectly, through the private insurers that administer the prescription program — and those insurers typically pay higher prices than government agencies, like the Veterans Administration, that buy medicines directly from drug makers.

The government is expected to spend at least $31 billion this year on the drug benefit, which provides partial drug coverage for people over age 65, according to the federal agency that runs Medicare. Next year, the program is expected to cost almost $50 billion — almost 20 percent of overall American drug spending. ...