John Castellani, head of the Pharmaceutical Research and Manufacturers of America, or PhRMA, proposed applying elements of the Medicare Part D prescription drug program more broadly, to other areas of Medicare.

He cited Medicare Part B, which covers drugs that are purchased and administered by physicians rather than obtained by beneficiaries with a doctor's prescription.

"We know that the marketplace approach that has been taken in Part D works very well. But Part B is very different," Castellani said at Washington's National Press Club. "The challenge is to look at whether or not what we've learned in Part D can be applied in other parts."

Such a move could help the $300 billion industry avoid Medicare payment reductions next year, when deficit talks are expected to resume on a range of potential changes that could prove draconian for the industry, including cuts to scientific research and Food and Drug Administration funding.

Part D, created by the George W. Bush administration, allows Medicare beneficiaries to purchase coverage from private insurers for drug costs that are not addressed by other segments of the Medicare program.

Drug costs are also covered by Medicare hospital insurance and private plans purchased through Medicare Advantage.

Castellani spoke a day after Health and Human Services Secretary Kathleen Sebelius announced that Part D premiums in 2013 would remain steady at about $30 a month, evidence she said that the program will remain accessible for most of Medicare's 50 million elderly and disabled beneficiaries.

He said the Part D program has saved Medicare billions of dollars since its inception in 2006

Medicare spending, which is expected to exceed $590 billion this year, is a leading presidential campaign issue and has been a major target of proposals seeking to cut the federal deficit and mounting national debt.

Castellani said he was concerned about a White House proposal that would save $135 billion over 10 years by increasing Medicare drug rebates within Part D, where the administration says per capita spending has outpaced spending for traditional Medicare.

He criticized mandates as a form of price controls, adding: "We are very much concerned that that would inhibit innovation."

(Reporting by David Morgan; Editing by Steve Orlofsky)

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