The Medicare prescription drug price plan that the Democrats presented the first week of November is not as ambitious as many legislators wanted, but both they and the experts say that the measure opens the door to reforms that could have effects dramatic.
Reducing spending on drugs has long been a rallying cry for consumers beset by rapidly rising prices. Although people with private plans had some protection, those with Medicare did not. They did not have out-of-pocket caps and often complained that federal law prevented them from using drug manufacturer coupons or any cost-cutting strategies.
A plan offered earlier this year by House Democrats, which included a strong negotiation on drug prices in Medicare, was blocked by a handful of moderates arguing that the price control would stifle innovation. The legislation also seemed destined to run into obstacles among senators.
The moderates supported a more limited negotiation on Medicare Part B drugs, that is, those administered in doctor’s offices and hospitals. Most Medicare members obtain their drugs through Part D, which covers drugs dispensed at a pharmacy.
When it seemed that the bill to finance President Joe Biden’s social agenda would go ahead without a proposal on the price of drugs, the pressure increased, there were intense negotiations and a hybrid proposal.
Includes the identification of 100 of the most expensive drugs, and the selection of 10 from them to negotiate a price reduction from 2025. It will also cap inflation on prescription drug prices for all insurance plans, restrict insulin copayments to no more than $ 35 and will limit Medicare beneficiaries’ annual drug expenses to $ 2, 000.
“It seemed as if the government had its hands tied. Now a precedent is set, ”said Senate Finance Committee Chairman Ron Wyden, Democrat of Oregon, who led the senators’ talks. “It is going to negotiate on the most expensive drugs: those for cancer, arthritis or blood thinners. And that is a precedent, and once the precedent is set that it can be negotiated, it is taking an important turn ”. Drug makers say the changes could hamper consumers’ choices.
“The pretext of ‘negotiation’ gives the government the power to dictate how much a drug is worth,” said Stephen Ubl, CEO of the PhRMA trade group, in a statement, “and leaves many patients facing a future with less access to medicines and fewer new treatments ”. But how exactly will these changes affect the majority of Americans, and who will they help? Answers vary, and many details will have to be clarified by government agencies if the legislation is passed.
Members of the House of Representatives warned, on November 4, that some minor changes were still being made and that the approval of both houses is required.
Insulin price control
One of the most obvious benefits will be for those who need insulin, the drug that saves the lives of people living with type 1 diabetes and that of some with type 2. Although the drug has been around for decades, its price it has risen rapidly in recent years.
Legislators heard dramatic accounts of people dying from not being able to afford insulin or having to drive to Canada or Mexico to get it cheaper. According to the bill, as of 2023, the out-of-pocket cost for an insulin supply for 25 days would be $ 35 maximum. And the benefit would not be limited to Medicare beneficiaries. That cap is the same as that set in a model five-year program in Medicare. In it, the Centers for Medicare and Medicaid Services (CMS) estimated that the average patient would save about $ 466 a year.
Detailed analyzes of the proposals are not yet available, so it is not clear what the fiscal impact or savings would be for patients out of Medicare.
Out-of-pocket limitation
Another obvious help for Medicare beneficiaries is the $ 2 limit, 000 in out-of-pocket costs for prescription drugs. Currently, prices for Part D prescription drug plans are calculated using a complicated formula that includes a gap in coverage, the infamous “donut hole,” with no limit to what patients can spend.
This has led to consumers with serious illnesses, such as cancer or multiple sclerosis , to pay thousands of dollars to cover his medication, according to a recent KFF analysis. Under current law, when an individual beneficiary and their plan spend $ 4, 130 this year on medications, the beneficiary enters the coverage gap from the “donut hole” and pay up to 25% of the price of the drug. After spending $ 6, 500 on medications, you will be responsible for 5% of the cost until the end of the year.
Limiting that spending is especially important for people who receive little help due to low incomes and suffer from expensive illnesses, said Dr. Jing Luo, professor of medicine at the Center for Healthcare Research at the United States. University of Pittsburgh. “The patient pays 5% of all drug costs, and 5% of $ 160, 000 is still a lot of money, “he added.
The legislation would alleviate this fear of consumers. Instead of having to face a year-end bill of more than $ 10, 000, maybe the bill at the end of that year for that very expensive treatment for multiple myeloma is $ 2, 000, ”he explained.
Negotiate drug prices
The negotiation of Medicare prices is probably the most prominent provision of the legislation, and the most controversial. Under the bill, the Department of Health and Human Services (HHS) would be in charge of identifying the 100 drugs and choosing The 10 that would be negotiated. That effort wouldn’t start until 2023, but the new prices would go into effect on 2025. Other . No drugs have yet been identified.
To respond to the concerns of some legislators, the legislation establishes specific provisions on how HHS will select the drugs to include. Only drugs identified as unique in their genre or as the sole remedy for a specific health problem would be included.
The list would also be limited to drugs that have been on the market beyond the period of exclusivity that the government grants them to be free competition and recover costs. For most drugs, the exclusivity can last for nine years. For the more complicated biological drugs, the period would be 13 years. The use of the exclusivity term allowed legislators to sidestep the question of whether drugs were still under patent protection.
The measure allows prices to be negotiated at a lower level for the oldest drugs chosen for the program. Thus, for example, the negotiated price for a non-biological medicine that carries less than 12 years available would be 75% of the average manufacturer price. This percentage would be reduced to 65% in the case of drugs that have exceeded 12 to 16 years of initial exclusivity, and at 40% in the case of medicines that have exceeded 25 years of initial exclusivity.
Medicines from smaller companies, with sales of less than $ 200 million, are excluded because legislators fear that lowering their prices undermines innovation.
Some experts wonder if the negotiated prices will have a direct impact on consumers.
“It certainly helps Medicare cut its costs,” said William Comanor, professor of health policy and management at UCLA’s Fielding School of Public Health. But how does that affect consumers? I’m sure Medicare doesn’t change the copayment. ”
However, he added, the copayment is less of a problem if spending on prescriptions is capped at $ 2, 000 for the consumer.
Link prices to inflation
Under the bill, manufacturers would have to report their prices to the HHS secretary, and if prices rise faster than inflation, drug manufacturers would have to pay a rebate to the government. Those who fail to pay the refund would face a civil penalty of 125% of the refund value.
The regulations would apply to drugs purchased through Medicare plans and those that are not.
In the long term, the idea is to curb drug price inflation, which has exceeded headline inflation for decades.
Drug prices would be linked to what they were in March, and the system would come into effect in 2023, therefore that there would be little immediate impact. (Some lawmakers hoped to lock in the program at prices several years ago, which could have a bigger effect, but that was changed in negotiations the last weekend in October.)
The long-term impact is also difficult to judge, because under the current complicated system, many people who pay for drugs receive help from drug companies, and most generics in the United States they are relatively cheap, Comanor said.
In the long term, however, the savings are expected to be substantial for the government, as well as for consumers who do not have the right to other programs to help pay for their drugs and they need high-end drugs.
At the very least, the legislation would move the United States in the direction of the rest of the world.
“The longer the drug is on the market, the lower the price,” said Gerard Anderson, professor of health policy at Johns Hopkins School of Medicine. “In all other countries, the price goes down over time, whereas in the United States it is common for prices to increase.”
KHN (Kaiser Health News) is the staff of KFF (Kaiser Family Foundation) , which produces in-depth journalism on health issues. Along with Policy Analysis and Surveys, KHN is one of KFF’s top three programs. KFF is a nonprofit organization that provides health information to the nation.