PILMA Warns that Changes to the Medicare Part D “Donut Hole” would have Unintended Consequences

On August 17, 2018, PILMA Chairman and Ironworkers General President Eric Dean sent the following letter to House and Senate leadership advocating for the repeal of a provision in the Bipartisan Budget Act that would, “threaten the viability of the [biopharmaceutical] industry to invest in new treatments and cures and decimate the competitive nature that is the foundation of the Medicare Part D program, without providing significant savings to the government or beneficiaries.”

This letter follows a February PILMA statement detailing the unintended consequences of this provision and urging opposition.

View the letter to Congressman Paul Ryan, Congresswoman Nancy Pelosi, Senator Mitch McConnell and Senator Charles Schumer.


For 15 years, labor unions in North America’s Building and Construction trades and companies in the biopharmaceutical industry have enjoyed a robust partnership, formalized as the Pharmaceutical Industry Labor-Management Association (PILMA).  As Chairman of the organization and General President of Iron Workers International, I have seen firsthand how government policies impact the industry’s investment in R&D, manufacturing and the subsequent infrastructure projects that provide construction jobs for our members. 

The biopharmaceutical industry is a vital sector in the United States, supporting over 4.7 million jobs and remains an important economic driver for the health of our nation. The building trades enjoy a strong relationship with the industry, which requires highly skilled workers to build research and manufacturing facilities to exacting standards. Not only do these companies employ our members to build new facilities, but to continually retrofit and upgrade existing infrastructure, providing a stream of steady work in their drive to find new discoveries of life saving medicines. 

Recently, Congress passed the Bipartisan Budget Act with a provision that would threaten the viability of the industry to invest in new treatments and cures and decimate the competitive nature that is the foundation of the Medicare Part D program, without providing significant savings to the government or beneficiaries.  

The provision changes the payment structure in the “donut hole” portion of Medicare Part D. After a drug insurance plan spends a certain amount on a beneficiary, the beneficiary moves into the donut hole phase of coverage where the cost sharing structure shifts between the insurance plan, the government, manufacturers and the beneficiary. Under the new provision, a large portion of the cost burden would shift from the insurers to patients and manufacturers. This would reduce insurers liability to just 5% of beneficiary costs in the donut hole, decimating incentives for insurers to keep costs low. Even more egregious is that beneficiaries will now pay five times more than their insurance plans during this phase of coverage. 

In no case should the beneficiary pay more than their insurer for the cost of medicines and treatment. That is what premiums are for. PILMA stated its opposition to this new provision back in February, however, recent fiscal analysis of this change further strengthens the case to roll back the provision.   

America’s skilled craft unions and PILMA have a long history of supporting policies that reduce barriers to access for patients, which includes lowering out-of-pocket costs. However, this plan does not result in significant savings for beneficiaries. The cost to manufacturers threatens the industry’s international footprint in the U.S. as well as the jobs that come with it. The men and women of the building trades depend on large infrastructure projects like those the biopharmaceutical industry provides to continue apprenticeship training programs, fund our health and welfare plans and keep our members earning a steady wage to remain in the middle class. 

The biopharmaceutical industry makes significant contributions to new scientific advancements and is pursuing not just innovative treatments, but also cures. It is essential that the government protect this industry that is vital to the fabric of the U.S. economy rather than raid its R&D funding to pad the pockets of insurers. 

Congress now has the opportunity to make changes to Medicare Part D that would make medicines more accessible and affordable for patients, improving health outcomes. Inaction to address the 2020 out-of-pocket cliff and the negative consequences from this provision in the Bipartisan Budget Act is not an option. We encourage Congress to repeal this provision and work with stakeholders to develop a policy that works for citizens.