WASHINGTON -- Medicare's new prescription drug plan has brought a sales windfall to the pharmaceutical industry.
Drugs such as Pfizer Inc.'s Lipitor have been the biggest winners, according to IMS Health , a healthcare information company that ranked the anti cholesterol medication as the top-selling drug paid for by the new prescription plan, known as Part D, through June 23.
The IMS Health figures come as Pfizer and other drug makers report second-quarter earnings that clarify Part D's effect on prescription sales.
In the first six months of 2006 , US sales of Lipitor rose 7 percent, to $3.83 billion, from a year earlier, the company reported last week. Pfizer said Part D contributed to nearly half of that sales gain.
While some fault Part D for slashing the rebates that drug manufacturers had paid, the industry's lobbyists call the program a success.
``Medicare drug coverage has improved the lives of millions of seniors with 90 percent of today's Medicare beneficiaries now receiving drug coverage," said Ken Johnson , senior vice president of the Pharmaceutical Research and Manufacturers of America. ``That's the windfall we should be talking about."
Since Jan. 1, when Part D was implemented, about 38.2 million Americans signed up for the program, according to the Centers for Medicare and Medicaid Services . And during that time the new prescription drug plan has picked up an increasing share of the bill for seniors' medicine. From Jan. 1 through June 23 , Part D paid for 194.3 million prescriptions, accounting for 12.4 percent of the 1.56 billion prescriptions filled by June 23 , according to IMS Health, which did not include data for the end of June, when Lipitor faced generic competition for the first time.
As Part D-financed prescriptions rose, the number of prescriptions for which consumers paid cash dropped to 11.5 percent, from 12.2 percent in 2005 . Medicaid, a program operated jointly by states and the federal government, paid for 9.1 percent of all prescriptions in the first half of 2006, down sharply from 16.1 percent in 2005, according to IMS Health.
In part that is because 6.1 million low-income Americans whose prescription drugs had been covered by Medicaid were automatically shifted to Medicare's Part D . As part of a law passed in 1990, drug manufacturers pay the government rebates. The rebates ensure that Medicaid pays no more than the best price paid by any commercial purchaser and is shielded from price increases exceeding the rate of inflation.
Under the prescription drug law, however, Medicare can't negotiate similar discounts from drug companies -- though that could change through legislation endorsed by Representative Nancy Pelosi, a Democrat from California. On Thursday , Pelosi, the House minority leader, sent a letter to House leadership seeking a vote on the bill as early as this week.
For Pfizer, the current law could result in an 85 percent reduction in the $133 million the company would have rebated this year had Medicaid beneficiaries who use Lipitor not transitioned to Part D coverage, according to Prudential Equity Group analyst Dr. Tim Anderson .
Indeed, Anderson projected one-time gains in 2006 for drug companies whose products were heavily used by Medicaid beneficiaries and would benefit the most from Part D.
Eli Lilly and Co. could gain 17 cents per share, or 6 percent this year based just on Part D-funded sales of Zyprexa, its schizophrenia and bipolar disorder treatment, according to Anderson's research note.
And shifting sales of Seroquel, another schizophrenia and bipolar disorder treatment, through Part D, versus Medicaid, could boost AstraZeneca PLC's earnings by 21 cents, or 8 percent this year, Anderson wrote.
Lilly reported $1.12 billion in Zyprexa worldwide sales for the second quarter, a 2 percent increase. In the United States, sales were slightly down, but the company reported ``improving prescription trends."
AstraZeneca is scheduled to report earnings Thursday.
David Gratzer , a senior fellow at the Manhattan Institute who opposes Part D because of the program's cost, said the steady increase in Part D-funded prescriptions should come as little surprise because, for many seniors, the program provided access to prescription drugs they could not have otherwise afforded.
``I don't see that as being inherently bad. But it doesn't justify Part D, either," he said.
Diedtra Henderson can be reached at email@example.com.