Even though the impending trials of former President Donald Trump are dominating political discourse in the United States, there is other news to cover.
On Tuesday in Washington, the administration disclosed the first 10 prescription pharmaceuticals for which Medicare will negotiate costs. This might be seen as a watershed moment.
Every recent president has made reducing the price of prescription pharmaceuticals a top priority, with Democrats notably seeking to do so through making better use of Medicare’s significant capacity to do so.
It will take some time to put this new authority into effect, and it will still have to withstand numerous legal challenges from pharmaceutical firms.
However, this is a change that has the potential to affect all Medicare beneficiaries in the future.
According to AWN’s Tami Luhby, the first 10 pharmaceuticals up for discussion are: Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, and Stelara; Fiasp; some other Novo Nordisk insulins, including NovoLog; and Imbruvica and Imbruvica injectable suspension.
The drugs are used to treat a wide range of medical issues, including cardiovascular disease, cancer, diabetes, and autoimmune disorders.
Medicare recipients spent $3.4 billion on these medications in 2014. According to Luhby’s findings, non-subsidized enrollees paid an average of $6,500 out of pocket. However, she adds that “the total gross covered prescription drug costs for Part D was $50.5 billion last year,” which is equivalent to about 20% of the total.
I contacted Luhby via email to inquire about the origins of Medicare’s newfound bargaining position, why it has eluded several recent presidents, and what we may expect in terms of price reductions and Medicare’s bottom line.
This is a transcript of our email exchange:
How did you suddenly become the one in charge of negotiations?
WOLF: Many presidents throughout many decades have sought (and been denied) this authority. How has this problem persisted for so long, and what made Vice President Joe Biden realise it was a problem?
LUHBY: Medicare didn’t start paying for medications until 2006, when Congress passed and President Bush signed Medicare Part D into law. However, the law expressly forbade Medicare from engaging in pricing negotiations.
Former President Bill Clinton, a Democrat, first proposed adding a medication benefit and allowing Medicare to negotiate prescription prices back in 1993. More recently, Democrats in the House advanced an ambitious bill that would have given the secretary of health and human services the authority to negotiate drug pricing in 2019.
Medicare’s efforts to negotiate prescription pricing have been thwarted for decades by the influential pharmaceutical industry, which has generously funded campaigns of congressmen and other politicians.
Democrats successfully pushed through the Inflation Reduction Act last year, giving Medicare the ability to negotiate prescription prices for the first time. However, its scope is significantly narrower than the House bill.
What’s the deal with these specific 10 medications?
WOLF: Will more medications be added to the list?
Inflation Reduction Act (I.R.A.) criteria for medicine selection (LUHBY)
The initial group of pharmaceuticals was selected from among the fifty drugs that account for the greatest share of Medicare’s Part D spending. Eligible drugs must have enjoyed a monopoly on the market for at least a few years.
After the first round, the Secretary of Health and Human Services can negotiate for an additional 15 medications in 2027 and another 15 drugs in 2028. By 2029 and later, the annual total increases to 20 medications.
For the first two years of talks, CMS will prioritise exclusively pharmacy-purchased Part D medications. Part B medications, those prescribed by a doctor, will be included as of the year 2028.
WOLF: In my experience, the cost of medical treatment and pharmaceuticals in the United States is significantly more than in other developed countries. Is it so, and will this newfound authority help?
LUHBY: Yes, in general the United States pays more than its peer countries for medical treatment and prescription pharmaceuticals. According to a recent analysis by KFF, the cost of the active ingredient in diabetes drugs like Ozempic and its sister treatment for weight reduction, Wegovy, is four times higher in the United States than it is in Germany or the Netherlands. These are the suggested retail prices; actual patient costs may vary.
In other countries, the government plays a larger role in the health care system and in determining prices, which is a major contributor to the price discrepancy. However, this comes with costs, as some Americans may now have easier access to cutting-edge medical care (if they can afford it).
Why does this cause so much debate?
Why shouldn’t the government be able to negotiate medication pricing, given that it is the largest single payer for health care?
Hospital treatment is only one example of a service that the Biden administration and academics say is regulated by Medicare’s reimbursement rates. Now it is exerting its influence over the cost of medicines.
However, drug companies and their allies have filed eight lawsuits challenging the program’s legality. The government claims the Constitution does not prohibit Medicare from negotiating prescription pricing.
Have pharma manufacturers made a strong case?
How are pharmaceutical companies defending themselves in court?
LUHBY: They all claim the programme violates the constitution in different ways.
Medicare is able to purchase manufacturers’ patented pharmaceuticals, which are private property, without paying fair market value under the fear of severe penalties, which some argue breaches the Fifth Amendment’s “takings” clause.
Furthermore, the challengers argue that the bargaining process violates the First Amendment because it forces producers to affirm that they accept and find fair the price that the government sets.
An excessive fee for pharma companies who refuse to negotiate and continue selling their medicines to the Medicare market is another argument that the process violates the Eighth Amendment.
What is the estimated cost savings to the government?
WOLF: Does this new authority have the potential to improve Medicare’s financial forecast?
LUHBY: Over a 10-year period, the Congressional Budget Office estimates that Medicare will save $98.5 billion thanks to the programme.
It is yet unclear how much money will be saved. The pharmaceutical industry contends that the Part D health plans already negotiate substantial rebates and discounts for many of the items on the list.
However, there are many who believe the expanded Medicare powers will be significant.
I was told by CMS Administrator Chiquita Brooks-LaSure that negotiating prescription prices is part of the plan to make Medicare financially stable.
How much money would it actually save?
WOLF: How much money will it save consumers who are purchasing these medications with a prescription?
LUHBY: That’s more difficult to define. Brooks-LaSure mentioned additional parts of the Inflation Reduction Act that she believes will have a significant effect on patient costs. She brought up the $2,000 limit on Medicare Part D out-of-pocket expenses that would go into effect in 2025.