Finding A Cure For Rx Woes

To understand the impact of rising drug prices on the elderly, you need go no further than the corner drug store, reports CBS News Chief Washington Correspondent Bob Schieffer.

Senior citizen Frances Wright says, "I just had a cousin die, and she wanted to sell her home - the children said no - just to pay for what was left of her medicine."

As drugs have become more effective, doctors have been writing more prescriptions. And that's the hitch for seniors. More than a third of the people on Medicare get no reimbursement for prescription drugs. Others get far less than they need to cover rising drug costs.

So more and more pharmacists say those who need medication, go without. "They literally say 'it's how much?' and 'I can't afford that on my income,'" says pharmacist Paul Gambino. "And if the doctor can't help them with samples, they literally take the prescription back and they forgo treatment. It's kind of scary."

On Wednesday, Congress opened hearings on how to help, but the only agreement was on how serious the problem is.

Martha McSteen, a social security and Medicare activist, testified, "The average senior takes four prescriptions daily, fills an average of 18 prescriptions a year and spent approximately three times as much on out-of-pocket expenses as the under-65 population."

The problem is money. One proposal floating around Congress calls for subsidies to only the poorest people on Medicare. But drugs are so expensive, that alone could cost $6 billion a year.

Another proposal would force drug companies to sell seniors medications at the same cut-rates given to bulk buyers like HMOs.

The pharmaceutical companies say that putting a lid on prescription drug prices could have unexpected and serious side effects - among them, less money for research and development of new drugs.

Most drugs take 12-15 years to develop and research can cost more than $500 million dollars. It's a huge investment, reports CBS News Correspondent John Roberts, and one the industry says will be jeopardized by the proposed legislation.

Alan Holmer, president of the Pharmaceutical Research and Manufacturers of America (PhRMA), says "If price controls were imposed on the industry, it would have a significantly negative impact on the continuing ability of the companies to continue to engage in research and development."

How much money is involved? The 17 million seniors who don't have a prescription plan spend up to $7.4 billion a year on medications.

Congress says that with company profits up as much as 20 percent each year, the industry can absorb price cuts. But where the real impact may be felt is with small biotech companies that are truly creating the "drugs of the future."

Their money comes not from sales, but from investors looking for a payoff down the road. In 1993-94, the last time price controls were discussed, new investments plummeted.

"If this ill is badly written, it could cut off the research in the very drugs that the baby boom population will need when the population reaches Medicare age," says Carl Feldbaum of the Biotechnology Industry Association.

The industry says that unless some sort of compromise is reached on pricing, it may fall to the government to increase funding for drug development.

Despite all of the plans to remedy this problem, it's not certain Congress will pass any of them this year.