Seniors and taxpayers facing higher costs in Medicare's popular prescription drug plan
Associated Press

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Pfizer to buy Allergan in $160 billion deal
Reuters nov 24 2015
NEW YORK | By Ransdell Pierson anD Bill berkrot

  WASHINGTON (AP) — With time running out on open enrollment season, many seniors are facing sharply higher premiums for Medicare's popular prescription drug program. The reason: rising drug costs have overtaken a long stretch of stable premiums.
  Beneficiaries have until Dec. 7 to see if there's a lower-cost plan that will cover their medications in 2016. Consumer advocates and experts say it will pay to shop around this sign-up season.
  "Premiums are going up. Deductibles are going up," said Tricia Neuman, a Medicare expert with the nonpartisan Kaiser Family Foundation. "There is some potential to save a lot of money by switching plans."
  Government spending on the program also has risen significantly, driven by pricey new drugs, notably for hepatitis C infection. The cost for the hepatitis drugs in the Medicare program is expected to be $9.2 billion this year, nearly doubling from 2014. Because of the prescription program's financial structure, taxpayers cover most of the cost for expensive medications. Three out of four adults infected with hepatitis C are baby boomers, the group now entering Medicare.
  Also known as "Part D," Medicare's prescription plan serves about 40 million older and disabled people. Benefits are provided through a variety of insurance arrangements. Stand-alone drug plans that work with traditional Medicare are the most popular, accounting for more than half of beneficiaries — about 24 million people.
  Sal Natale, a retired dentist who lives near Tampa, Florida, said prescription premiums for him and his wife are going up about 30 percent next year, and he doesn't see a good alternative.
  "I'm just going to grin and bear and hope it starts moderating," Natale said. The couple is signed up in the Humana Enhanced plan, one of the top 10. Nationally, premiums for that plan are going up by about $13 a month, according to the Kaiser foundation.

  Indicators signal rising costs across the program. Among them:
—independent estimates by Kaiser and the consulting firm Avalere Health show increasing premiums for stand-alone drug plans. The average premium will rise from $36.68 to $41.46 per month next year, or 13 percent, according to Kaiser. Even if many beneficiaries switch to lower-cost options, it's likely to be the biggest increase since 2009.

—the maximum deductible for prescription coverage will rise by $40, to $360. That's the biggest increase in the deductible since the inception of Part D in 2006. The deductible is the amount of drug costs that beneficiaries must pay each year before their insurance kicks in.

—taxpayer expenditures for the "catastrophic" portion of the benefit — in which beneficiaries with high drug bills pay only 5 percent of the cost — will rise by $4.5 billion in 2016, an increase of more than 14 percent. Spending for catastrophic coverage has doubled in just a short time, from $15.5 billion in 2012 to an estimated $31.2 billion this year.

  The analyses from Kaiser and Avalere are seemingly at odds with the message coming from the Obama administration, which estimates that drug premiums will remain stable in 2016, averaging $32.50 a month.
  But the administration and the independent analysts measure differently. For example, the administration adjusts its number for the estimated impact of people assumed to be switching to lower-premium plans.
  The outside analysts don't make similar assumptions. Instead, they focus on what's happening to premiums in the plans for which people are currently signed up.
  Nationally, average premiums are going up by more than 15 percent in five of the top eight plans, according to the Kaiser study. Two plans will see single-digit increases. One plan — SilverScript Choice — will see a small reduction. The most popular plan — AARP MedicareRx Preferred — will go up from $50.19 to $60.79, a 21 percent increase.
  Sean Cavanaugh, deputy administrator at the Centers for Medicare and Medicaid Services, said the administration has a good track record with its estimates. "We do think ours is more illustrative of what beneficiaries actually experience," he said.
  Cavanaugh did say the administration is concerned about the cost of new breakthrough drugs. The insurers who deliver Medicare's prescription benefit have limited options for bargaining down the prices of those medications, because usually there's no competing alternative.
  "The challenge in the Part D program is around high-cost specialty drugs," said Cavanaugh. "We certainly have to be concerned about anything that's driving that much cost in our program."
  With polls showing that drug costs are the top health care issue for the public, presidential candidates are weighing in. Options they propose range from giving Medicare direct authority to negotiate drug prices, backed by Democrat Hillary Rodham Clinton, to speeding up approval of new drugs, advanced by Republican Jeb Bush.
  Consumer advocates are skeptical that seniors shopping for better deals will be sufficient to blunt the cost increases.
  Finding a new plan can be overwhelming, said Bonnie Burns, a longtime Medicare counselor with nonprofit California Health Advocates. "People can't deal with the complexity of deductibles, coverage tiers, and prior approval," she said.
  Natale, the Florida retiree, says he's not sure what the right answer is. He's wary of government controls on private industry, but the relentless growth of costs worries him.
  "I really don't think I have much of an option for protecting me and my wife if I get some serious illness and I need big-time drugs," he said.


Pfizer to buy Allergan in $160 billion deal
Reuters nov 24 2015
NEW YORK | By Ransdell Pierson anD Bill berkrot

  Pfizer Inc on Monday said it would buy Botox maker Allergan Plc in a deal worth $160 billion to slash its U.S. tax bill, rekindling a fierce political debate over the financial maneuver.
  The acquisition, which would create the world's largest drugmaker and shift Pfizer's headquarters to Ireland, would also be the biggest-ever instance of a U.S. company re-incorporating overseas to lower its taxes. U.S. President Barack Obama has called such inversion deals unpatriotic and has tried to crack down on the practice.
  Democratic presidential front-runner Hillary Clinton pledged to propose measures to prevent such deals. The merger was also slammed by her rival Senator Bernie Sanders as well as by Republican presidential candidate Donald Trump.
  "The fact that Pfizer is leaving our country with a tremendous loss of jobs is disgusting," Trump said in a statement.
  It was not immediately known how many jobs would be lost as a result of the merger.
  Shares of Allergan fell 3.4 percent and Pfizer closed down 2.6 percent as investors learned the merger, under discussion since late October, would bring lower cost savings than they had hoped.
  Pfizer also disappointed some investors by delaying by two years a decision on whether to sell off its division consisting of products facing generic competition.
  To avoid potential restrictions, the transaction was structured as smaller, Dublin-based Allergan buying Pfizer, although the combined company will be known as Pfizer Plc and continue to be led by Chief Executive Officer Ian Read.
  The U.S. Treasury, concerned about losing billions in tax revenue, has been taking steps to limit the benefits of tax inversion deals, but it admitted last week that it would take legislation from Congress to stop such moves.
  The deal enhances offerings from both Pfizer's faster-growing branded products business, with additions like Botox, and its older established products unit. Still, investors had hoped Pfizer would sell off the lower-margin business in 2017, a move now put off by the time required to integrate Allergan.
  "The only thing I'd really say I'm disappointed about is Pfizer's postponing their break up," said Gabelli Funds portfolio manager Jeff Jonas. He called the delay decision "pretty conservative and a little late."
  Others were disappointed by other aspects of the deal, including the projected cost savings, and a lack of details on potentially increased share buybacks.
  "Synergies of $2 billion plus in the third year are less than the $4 billion we had estimated in year 1," said Cowen and Co analyst Steve Scala.
  On a conference call with analysts, Pfizer said the merger would give it enhanced access to its tens of billions of dollars parked overseas and allow for more share buybacks, dividend payments and business development. The combined company would have annual sales of about $64 billion.
  The deal is expected to close in the second half of 2016.

  Allergan CEO Brent Saunders will become president and chief operating officer of the combined company, with oversight of all commercial businesses.
  Read, who has long sought to slash Pfizer's U.S. tax rate, said the deal would help put the company on "on a more competitive footing" with overseas-based rivals.
  The company had estimated it would pay about 25 percent in corporate taxes this year, compared with about 15 percent for Allergan. Pfizer Chief Financial Officer Frank D'Amelio said he expected a combined tax rate of 17 percent to 18 percent by 2017.
  The deal comes some 18 months after the failure of Read's initial attempt at an inversion, a $118 billion bid to acquire Britain-based AstraZeneca Plc that ran into stiff opposition from that company's management and UK politicians.
  Saunders said the combination would provide access to about 70 additional worldwide markets for Allergan products, such as Botox wrinkle treatment, Alzheimer's drug Namenda and dry-eye medication Restasis.
  For 166-year-old Pfizer, Allergan would be the fourth huge acquisition over the last 15 years - one for each of the last 4 CEOs - following purchases of Warner-Lambert, Pharmacia and Wyeth.
  This also caps a record year for healthcare mergers and acquisitions, taking their cumulative value in 2015 to more than $600 billion..
  They include prior big deals involving Saunders, such as the $70.5 billion acquisition of Allergan by Actavis, which then took the Allergan name, and an agreement to sell that company's huge portfolio of generic drugs to Teva Pharmaceutical Industries for $40.5 billion.
  Allergan and Pfizer estimated their merger would increase earnings per share by 10 percent, excluding special items, in 2019 and add by a high-teens percentage rate in 2020.
  The deal values Allergan shares at $363.63 each, about 16 percent more than their closing price of $312.46 on Friday. Pfizer shareholders would control of 56 percent of the combined company. The record-breaking deal includes $8 billion in debt, Pfizer said.

  Pfizer was advised by Guggenheim Securities, Goldman Sachs & Co, Centerview Partners and Moelis & Co. Its legal advisers are Wachtell, Lipton, Rosen & Katz; Skadden, Arps, Slate, Meagher & Flom LLP and A & L Goodbody.

  Allergan was advised by J.P. Morgan, Morgan Stanley and Cleary Gottlieb Steen & Hamilton LLP. Latham & Watkins LLP and Arthur Cox are its legal advisers.

  (Additional reporting by Caroline Humery in New York and and Ankur Banerjee in Bengaluru; Editing by Lisa Von Ahn and Christian Plumb)