EXPLAINER: Dropping prescription prices to take time in new law
WASHINGTON– After decades of failed attempts, Democrats have passed legislation to quell soaring drug prices for some in the United States.
It will take years for people to realize some of the biggest savings promised in the climate and health care bill that President Joe Biden signed into law this month.
The bill primarily helps the roughly 49 million people who enroll in Medicare drug coverage. But many will be left out of direct savings after lawmakers scrap cost-cutting measures for the majority of people covered by private health insurance.
A look at how some could benefit from the drug savings provisions of the “Reduction of Inflation Act” and how drugmakers could push back against those efforts.
For the first time, Medicare can negotiate the price of its most expensive drugs.
In the United States, “we’ve never had an entity that negotiated on behalf of such a large group of people before,” said Leigh Purvis, director of cost and healthcare access at the AARP.
This new bargaining power won’t take effect until 2025, when Medicare can negotiate the price of 10 drugs covered by its prescription plan. By 2029, Medicare will be able to negotiate the cost of as many as 60 drugs.
This will take time because the Department of Health and Human Services will have to develop a plan to select the drugs that will be traded. The convoluted rule-making process will take years to devise and will be the subject of intense lobbying and scrutiny from the pharmaceutical industry, which is eager to create loopholes in the new rules.
“The biggest boost is definitely going to be the negotiations because the secretary is setting up a whole new program, and they’re going to be doing a lot of hiring,” Purvis added.
The savings should be huge. The nonpartisan Congressional Budget Office estimates costs could fall by $100 billion over the next decade.
Which drugs Medicare and patients will save on, however, remains a bit of a mystery.
In the first year, Medicare will be allowed to negotiate the cost of the 10 drugs it spends the most money on, provided those drugs have been approved by the Food and Drug Administration for at least nine years and are not have no rival generics. on the market.
Right now, for example, the blood thinner Eliquis, used by 2.6 million Medicare beneficiaries at an annual cost of nearly $10 billion, would likely top the list.
This could encourage pharmaceutical companies to launch new drugs at a higher price, knowing that the cost of the product will be negotiated down for Medicare, warned Arthur Wong, analyst for S&P Global, a financial research firm.
PhRMA, the trade organization that represents pharmaceutical companies, has acknowledged its intention to push back against the law.
“We are exploring all opportunities – including legislative, regulatory and legal – to ensure that patients have access to the medicines they need and that our industry can continue to develop life-saving cures and treatments,” the carrier said. PhRMA spokesman Brian Newell in a statement emailed to The Associated Press.
A CEILING ON THE PRICES OF DIRECT MEDICINES
The bill limits the amount of money Medicare beneficiaries must use for drugs, but, again, it will take some time for these rules to sink in.
In 2024, Medicare will get rid of a 5% coinsurance required of patients who have reached the catastrophic threshold, which is currently set at $7,050 for out-of-pocket drug expenses. Nearly 3 million Medicare patients met that threshold at some point from 2015 to 2019, according to a Kaiser Family Foundation study.
The following year, out-of-pocket drug costs will be capped at $2,000 for Medicare Part D, which generally covers prescription drugs at home.
HOW WILL DRUG PRICES BE CONTROLLED BY THEN?
The Inflation Reduction Act includes a series of controls aimed at immediately mitigating rising Medicare drug costs. The bill caps copayments for insulin at $35 per month starting in January, but only for Medicare beneficiaries. A $35 per month limit on out-of-pocket expenses for people with private health insurance has been reduced.
Starting next year, drug companies will also have to pay a rebate to Medicare if they raise the cost of a drug above the rate of inflation. The industry consistently raises drug prices above inflation every year.
A similar rule exists in Medicaid, so the Centers for Medicare and Medicaid have experience running this program, said Rachel Sachs, a law professor at Washington University in St. Louis.
“They were helpful in controlling the rate of increase,” she said of the discounts.
Only Medicare patients will benefit directly. A decision to include in the calculation people with private insurance who are sold overpriced drugs has been removed from the legislation.
Some health policy experts hope this provision, along with the others in the package, will help insurance companies negotiate drug prices for their customers, potentially extending savings to millions of people.
But others are waiting to see if the bill has the opposite effect. Medicare accounts for about a third of the pharmaceutical industry’s market, which means companies could try to squeeze more profits from elsewhere.
“It could be a threat that non-Medicare payers end up having to pay more or at least face tougher negotiations with the pharmaceutical industry,” analyst Wong said.
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