The American Action Forum (AAF), a conservative think tank headed by former Congressional Budget Office Director Douglas Holtz-Eakin, says to help pay for Obama’s American Jobs Act, prescription drug manufacturers would be required to give billions of dollars in rebates to the federal government to have their drugs dispensed to low-income seniors through the Medicare Part D program.
Those rebates would save the federal government $135 billion over ten years, the Office of Management and Budget estimated. But the savings would come at the expense of the pharmaceutical industry:
“At a minimum, these additional rebates would constitute a direct, dollar-for-dollar reduction in revenue to the pharmaceutical industry,” the AAF study said. “Using the historic relationship between revenues and employment, we find that by 2021 the proposal could reduce pharmaceutical and related employment by up to 238,000 jobs.”
"The president and liberals in Congress are pushing proposals they claim would stimulate our economy, but would actually directly destroy American jobs," said Holtz-Eakin. "Mandatory Part D drug rebates would put people out of work, increase costs for seniors and privately-insured patients, and slow research and development for new drugs."
The study says the pharmaceutical industry would absorb the revenue reduction in three ways – by reducing payroll employment, reducing profits, and possibly charging higher prices for other prescription drug buyers.
Moreover, a reduced investment in research and development could slow the process of bringing new drugs to market, which would impose further costs both on patients in need of new treatments and on the industry.
According to the White House, “The purpose of the American Jobs Act is simple: put more people back to work, put more money in the pockets of working Americans, and do so without adding a dime to the deficit.”
To pay for the bill “without adding a dime to the deficit,” the president is recommending – among many other things – “modest adjustments in important entitlement programs such as Medicare and Medicaid.”
The White House explains it this way: Under current law, drug manufacturers are required to pay specified rebates for drugs dispensed to Medicaid beneficiaries. In contrast, sponsors of the Medicare Part D (prescription drug) plan negotiate with manufacturers to obtain plan-specific rebates at unspecified levels.
The White House wants Medicare to get the same rebates that Medicaid receives for brand name and generic drugs provided to beneficiaries who receive the Medicare Low-Income Subsidy beginning 2013. “This option is estimated to save $135 billion over 10 years,” says the White House Office of Management and Budget.