Monday, November 8, 2010

More Merck Guidance On The Size Of 2011 "Doughnut Hole" Reform Discount Payment

We've been following this in real time, right along (though it now seems the earlier Bloomberg estimate is far too low, in the graphic at right), but here is Whitehouse Station's latest official word on the subject of the size of the discount it will owe in 2011, under health care reform -- straight from page 35 of the Merck SEC Form 10-Q:

. . . .Beginning in 2011, the new legislation requires drug manufacturers to pay a 50% discount on Medicare Part D utilization incurred by beneficiaries when they are in the Medicare Part D coverage gap (i.e., the “donut hole”). Also, beginning in 2011, the Company will incur an annual health care reform fee, which is being assessed on all branded prescription drug manufacturers and importers. Sales included in the calculation of the fee are those made to the following federal programs or entities or pursuant to coverage under these programs: Medicare Part D, Medicare Part B, Medicaid, Department of Veterans Affairs, Department of Defense, and the TRICARE program. The fee will be calculated based on the industry’s total sales of branded prescription drugs to these specified government programs. The percentage of a manufacturer’s sales that are included is determined by a tiered scale based on the manufacturer’s individual revenues. Each manufacturer’s portion of the total annual fee (ranging from $2.5 billion to $4.1 billion annually) will be based on the manufacturer’s proportion of the total includable sales in the prior year. As additional guidance and regulations are issued, the Company will revise its implementation approach as appropriate and will continue to assess the impact of the legislation accordingly. . . .

As ever, we'll keep you posted.

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