Big Pharma's $2.5 billion Medicare windfall

Big Pharma is beginning to reap a windfall from a surprisingly lucrative niche market: drugs for poor old people.The New York Times reports that switching the elderly poor from Medicaid to Medicare's new drug benefit programme (aka "Part D") will cost US taxpayers as much as $2.5 billion.

Why's that, Insider asks?

In the past state Medicaid directors operated under laws requiring that the poor get the lowest negotiable price.

But when Congress passed the Medicare drug benefit in 2003, it specifically forbade the federal government from negotiating with drug firms.

Now why did they do that, Insider wonders?

Lobbying, by Big Pharma, perhaps?

So who are Big Pharma's winners?

Timothy Anderson, a pharmaceutical analyst with the Prudential Equity Group, estimates that if Part D were not in place the rebates for the makers for all of 2006 would have been more than $2 billion for 13 drugs widely used by the people transferred from Medicaid to Part D.

Dr. Anderson estimates that because the companies will not have to pay those rebates under Part D, revenue to Glaxo from Lamictal will increase by $298 million this year, AstraZeneca’s Seroquel sales will rise by $521 million, and Plavix revenue will increase $169 million.

Remember folks, that's $2.5 billion of US taxpayers money going direct to Big Pharma rather than being used to help the poor and old.