Medicare Part D

Medicare Part D is a US federal program to subsidize the costs of prescription drugs for Medicare beneficiaries in the United States. It was enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) and went into effect in 2006.

Apart from being ridiculously expensive it has another catch : The benefit is administered by private insurance plans that are reimbursed by the Centers for Medicare and Medicaid Services (CMS).

What's does this mean for pharmaceutical companies ?

There are two plans that people can opt to : 1. Prescription Drug Plan (PDP) for drug coverage only and 2. a Medicare Advantage plan (MA) that covers both medical services and prescription drugs (MA-PD).

The drug plans control drug costs through negotiating prices. One of the positions they can use in their negotiations with the drug companies is that not all drugs will be covered at the same level, giving participants incentives to choose certain drugs over other drugs.

So a generic drug would get a higher priority over an expensive proprietary alternative - this will mean a big pinch on major pharma. 

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