Drug manufacturers will offer some $80 billion in prescription discounts for Medicare recipients under a deal unveiled on Saturday, which could boost President Barack Obama as he pushes to overhaul the $2.5 trillion U.S. healthcare system.

U.S. President Barack Obama (L) smiles as he is introduced 

to speak about the agreement to lower drug costs for seniors 
by Barry Rand, the CEO of AARP, in the Diplomatic 
Reception Room of the White House in Washington June 22, 
2009. Reuters/Jason Reed.

The agreement reached today to lower prescription drug costs for seniors will be an important part of the legislation I expect to sign into law in October, Obama said in formally announcing the pact.

The companies have agreed to provide for the next decade a 50 percent discount for those elderly and disabled Americans in the Medicare health insurance program who face a gap in coverage after their drug costs reach a certain level, known as the doughnut hole.

The existence of this gap in coverage has been a continuing injustice that has placed a great burden on many seniors, Obama said in a statement. Medicare coverage does not apply to payments between $2,700 and $6,154.

The deal was negotiated between the Pharmaceutical Research and Manufacturers of America industry association and Senate Finance Committee Chairman Max Baucus who is leading one of many congressional panels drafting healthcare legislation.

This commitment to support legislation that will help close the coverage gap reflects our ongoing work with Congress and the Administration to make comprehensive health care reform a reality this year, the industry group said in a statement.


Costs for healthcare have soared faster than the inflation rate and the Democratic president has pledged to work to curb those costs as well as find a way to provide coverage to the 46 million uninsured Americans.

Americans strongly support fundamental changes to the healthcare system and a move to create a government-run insurance plan to compete with private insurers, according to a New York Times/CBS News poll published on Saturday.

The White House has said some $950 billion in cuts have been found to cover its reform efforts but there are reports that the costs could reach as much as $1.6 trillion and still not cover everyone, setting off a fierce debate on how to close the gap.

That has given Republicans an opening to attack, particularly since Americans are growing worried about the eye-popping record budget deficits facing the country -- more than $1.8 trillion in fiscal 2009 alone.

Democrats in the U.S. House of Representatives proposed a draft of their healthcare bill on Friday that calls for all citizens to be able to get insurance regardless of medical history and that coverage should be mandatory for individuals and businesses.

They would create a new government plan to help cover the uninsured -- a move backed by Obama but resisted by Republicans and some centrist Democrats who fear it will overwhelm private insurers and require vast amounts of public funding.