The Inflation Reduction Act would allow Medicare to negotiate prescription drug prices with manufacturers to combat soaring drug costs, something it has never been allowed to do.So, the obvious question is: If you were on Medicare, would you your Have drug costs come down?
The less obvious answer is: possibly, but not imminently.
Andrea Ducas, vice president for health policy at the Center for American Progress, a progressive nonpartisan policy group, said the Medicare drug price negotiations “are a big deal.”
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“Drug price negotiations actually bring the United States closer to the level of other countries,” Ducasse said. “What this means is that, for the first time, there’s the ability to have a little bit of a check and balance on the pharmaceutical industry. That’s pretty remarkable.”
But drug price negotiations may be a bigger deal for the federal government than for many of Medicare’s 65.7 million beneficiaries.
The Congressional Budget Office estimates that the negotiations would save the federal government about $100 billion by 2031 if they were not hampered by ongoing litigation between pharmaceutical companies and the U.S. Chamber of Commerce.
This is more important to Medicare than it is to many people in Medicare
“I think the negotiation plan is more about saving Medicare money on these drugs so that it can invest in other programs to improve prescription drug coverage for Medicare people,” said Juliette Cubans, associate director of America’s Medicare Program. Juliette Cubanski said. KFF, a health policy research group.
Drug costs for most beneficiaries won’t fall anytime soon due to price negotiations, one reason being that there are only 10 drugs on the initial list. They are the drugs that cost the most by Medicare, have no generic or biosimilar equivalents, and have been on the market for at least seven years.
The first drugs to enter price negotiations are the blood thinners Eliquis and blood cancer), Entresto (treats heart failure), and Stelara (treats psoriasis and Crohn’s disease).
However, negotiated prices for these drugs will not take effect until 2026. Another 15 drugs would be added in 2027, and 20 more in subsequent years, until there are not enough prescription drugs to meet the requirements negotiated under the Inflation Reduction Act.
Cubanski noted that popular rheumatoid arthritis drug Humira and multiple myeloma drug Revlimid are two drugs that are ineligible.
Starting in 2028, prescription drugs administered by medical clinics (i.e., clinics covered by Medicare Part B) will be eligible for negotiation.
Who notices the effects most
“The people who might notice it are people who take some of the more expensive drugs that Medicare is negotiating prices for, such as cancer drugs,” Cubanski said. The blood cancer drug Imbruvica costs about $600 per pill, or about $17,000 per month.
“On average, the final negotiated price (for drugs on the list) is likely to be at least 25 percent lower than the current price, and possibly even 50 percent lower,” said Dr. Aaron Kesselheim, a professor of medicine at Harvard Medical School and a Ph.D. , director of regulatory, therapeutic and legal programs at Brigham and Women’s Hospital.
But that doesn’t mean people enrolled in Medicare will necessarily see prices drop by 25% to 50%. That’s because the negotiated figure will be based on the drug’s “list price” and does not take into account manufacturer rebates. Therefore, the price that beneficiaries pay does not decrease dollar for dollar.
“For many drugs, the cost-sharing that people face in a Part D plan is a fixed dollar copay, maybe $40 or $45, and it’s not tied to the list price,” Cubanski said. “I think it’s less clear whether these negotiated prices will translate directly into out-of-pocket savings for those taking lower-cost medications.”
Messaging challenges
Kesselheim acknowledged that “it’s going to be a challenge for Medicare’s messaging” when the public doesn’t think price negotiations necessarily mean lower costs for them.
However, he thinks negotiated prices could lead Part D insurers to lower premiums and copays.
By law, price negotiations will require Part D plans to provide drugs on the government’s list. “Once negotiated prices take effect in 2026, there will be the potential to expand coverage of these drugs,” Cubanski said.
On the other hand, these plans will not be required to cover similar drugs that are already covered.
Therefore, unless you change your Part D plan, you may not be covered for certain drugs that are not covered for you now, or may not be able to get drugs that are currently covered.
Whether you benefit from a negotiated price also depends in part on your Part D plan’s copay and deductible rules. “It’s too early to tell what negotiated prices will mean for individuals taking drugs on the list,” Ducasse said. “Of course, we expect out-of-pocket costs to come down significantly.”
More significant changes in the new law
You’re more likely to see out-of-pocket prescription drug costs drop thanks to another part of the Inflation Reduction Act: changes to Medicare’s coverage of catastrophic prescription drug costs.
KFF says that starting in 2024, by law, you will no longer have to pay the 5% drug cost once you spend approximately $3,300 on a brand-name drug. Part D out-of-pocket expenses will be capped at $2,000 in 2025, and that amount will be tied to the rate at which Part D expenses grow.
Kesselheim says catastrophic prescription drug price caps included in Inflation Reduction Act because Medicare will save a lot of money through drug price negotiations.
Fight price negotiations in court
Drug manufacturers subject to the new law have signed agreements to negotiate prices with Medicare, even as they fight the planned rules in court. This is because if they fail to do so and the law comes into effect, they will be subject to severe tax penalties.
Whether the court challenge will overturn the bargaining rules remains a big question. Some analysts believe the fight may eventually make its way to the Supreme Court, but many believe the law will stand.
“I think we’re going to see this law go into effect the way it’s intended because I don’t think the constitutional challenge is tenable,” Kesselheim said.
But some analysts say if prices for a few drugs are negotiated lower, manufacturers may raise prices on other drugs to compensate or slow down the pace of bringing new prescriptions to market.
“I think a lot of this is pretty speculative from my perspective at this point, although I think some manufacturers have indicated that they’ve made decisions internally to shift resources,” Cubanski said.
She added that no matter how things unfold, if price negotiations occur, “it’s a step in the right direction.”
“This is a much-needed development that has been a long time in the making,” Ducasse said.
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