June 30, 2005

CBO Tells Wyden Elimination AD Costs Could Save Hundreds of Millions

Wyden-Sununu legislation would eliminate cost to taxpayers of drug advertisingfor medicines provided through Federal health care programs

Washington, DC - At a hearing of the Senate Special Committee on Aging today, the Director of the Congressional Budget Office (CBO), Douglas Holtz-Eakin, told U.S. Senator Ron Wyden (D-Ore.) that the Federal government potentially could save between $300 million and $500 million if the cost of advertising prescription drugs directly to consumers is eliminated in Medicaid alone. Wyden and U.S. Senator John Sununu (R-N.H.) introduced legislation earlier this year to require discounts for Federal health programs such as Medicaid, to eliminate advertising costs passed on by pharmaceutical companies. Today, Holtz-Eakin suggested ways that the Wyden-Sununu legislation could maximize savings for American taxpayers. Wyden asked Holtz-Eakin, "It's our sense that the government could save about $300 million to $500 million a year on Medicaid, in effect, over a billion dollars over a five year period. Do you think that's a reasonable analysis?" Holtz-Eakin said that if Medicaid, which may buy as much as ten percent of all prescription drugs in the coming years, is able to eliminate its share of advertising costs for those drugs, $300 million to $500 million in savings is a reasonable estimate. "Billions of taxpayer dollars could be saved through the advertising provisions Senator Sununu and I are working on," said Wyden. "I'm pleased that we've found a way here to get savings in the Medicaid program without hurting anyone." Drugs advertised directly to consumers are among those drugs on which Federal programs spend the most total money for outpatient care. Studies have indicated that advertising, not medical need, may contribute to increases nationally in prescriptions for those drugs. Wyden and Sununu unveiled the Pharmaceutical Advertising and Prudent Purchasing Act of 2005 in May to reduce taxpayers' costs for commonly advertised prescription drugs purchased by Medicaid and other Federal programs. The Wyden-Sununu legislation also requires a report to Congress on how drugs advertised directly to consumers impact Federal programs in terms of purchase volume, cost, and their suitability for patients' medical needs. For more information on the Wyden-Sununu Pharmaceutical Advertising and Prudent Purchasing Act, go to http://wyden.senate.gov/media/2005/05262005_drug_advertising_bill.html