The Pharmaceutical Research and Manufacturers of America industry association and the Senate Finance Committee have worked out a 10-year arrangement whereby US Medicare drug costs for elderly Americans will be reduced.

According to the terms negotiated by Sen. Max Baucus, D-Montana, nearly $80 billion in prescription drug discounts will be offered by drug manufacturers to the recipients of Medicare. For the elderly and disabled Americans in the Medicare health insurance program, facing a coverage gap after drug costs reach the so-called "doughnut hole" level, the companies will provide a 50 percent discount.

The agreement between the industry association and the Senate Committee comes at a time when President Barack Obama is pushing for a revamp of the $2.5 trillion US healthcare system, which has seen healthcare costs soared faster than even the inflation rate.

Obama, who is looking at ways to cut healthcare costs, alongside the expansion of coverage to the 46 million uninsured Americans, has termed the recent deal as a "turning point" in the proposed direction.

In a statement on Saturday, Obama said: "Key sectors of the health care industry acknowledge what American families and businesses already know that the status quo is no longer sustainable. 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."