Can Medicare Negotiate the Cost of Prescription Drugs?

An increasing number of older Americans can’t afford the prescriptions they need to stay healthy. In a recent study, roughly 1 in 5 people age 65+ took shortcuts—such as skipping doses or delaying refills—due to financial worries.¹ Said President Biden in a statement: “For many Americans, the cost of one drug is the difference between life and death, dignity and dependence, hope and fear.”

That could soon change as a result of the Medicare Drug Price Negotiation Program. If you have Medicare, keep reading to find out how (and when) this program may affect you or an older adult you care for.

What is the Medicare Drug Price Negotiation Program?

The Medicare Drug Price Negotiation Program is part of the Inflation Reduction Act (IRA) of 2022, which includes several provisions to help lower prescription drug costs for people with Medicare. This provision will allow Medicare—for the first time ever—to negotiate drug prices directly with pharmaceutical companies. The goal is to improve the affordability of some of the most expensive drugs covered under Medicare Part B and Part D. Part B covers drugs administered by a physician.

Reduced prices from drug negotiations for the first 10 drugs will take effect starting in January 2026.

Going forward, the Centers for Medicare & Medicaid Services (CMS) will then select:

• Up to 15 additional drugs to negotiate for 2027
• Up to 15 additional drugs (including those under Part B) for 2028
• Up to 20 additional drugs for 2029 and subsequent years

“Today’s announcement is a game changer for the millions of older adults who rely on these medications every day," said Ramsey Alwin, NCOA President and CEO, in a statement on the start of drug price negotiations. "Our research shows that the cost of chronic conditions falls heaviest on women and people of color, who have the fewest resources. Lower prices are a matter of equity."

A recent KFF survey showed strong bipartisan support (83%) for allowing the federal government to negotiate drug prices.

Which prescription drugs will be negotiated?

The drugs that qualify for Medicare price negotiation are from a list of high-cost, brand-name, single-source drugs that have no generic competition on the market. In 2022, Medicare enrollees paid a total of $3.4 billion in out-of-pocket costs for these medications.

The 10 drugs selected for the first round of Medicare negotiation:

• Eliquis: For preventing strokes and blood clots
• Jardiance: For type 2 diabetes and heart failure
• Xarelto: For preventing strokes and blood clots
• Januvia: For type 2 diabetes
• Farxiga: For chronic kidney disease
• Entresto: For heart failure
• Enbrel: For arthritis and other autoimmune conditions
• Imbruvica: For blood cancers
• Stelara: For Crohn’s disease
• Fiasp; Fiasp FlexTouch; Fiasp PenFill; NovoLog; NovoLog FlexPen; NovoLog PenFill: Insulin products for diabetes

How will these changes affect me?

Once fully implemented, the Medicare Drug Price Negotiation Program is expected to drop prices on negotiated drugs for up to 9 million older adults, who now pay as much as $6,497 out of pocket each year for these medications. People with Medicare will have better access to prescription drugs that help them manage chronic and life-threatening conditions. More older adults will be able to start medications, take them appropriately, and stay on them without making potentially dangerous trade-offs.

Experts predict the program will also save taxpayers $160 billion by lowering Medicare costs.

Other Medicare prescription drug provisions

In addition to drug price negotiation, there are several other important provisions in the Inflation Reduction Act designed to lower health care costs for people with Medicare.

Several provisions have already taken effect:

• Medicare will cover a greater portion of the cost for high-quality biosimilars (drugs made from a natural source) for a period of five years, which began October 1, 2022.
• Monthly out-of-pocket cost sharing for insulin is capped at $35.
• Vaccines recommended by the Advisory Committee on Immunization Practices (ACIP) are 100% free.
• Drug manufacturers that raise their prices at a faster rate than inflation will face a financial penalty.

Starting in 2024:

• The 5% coinsurance for catastrophic drug costs will be eliminated.
• Eligibility for the full Medicare Part D Low-Income Subsidy (LIS, also called “Extra Help”) will be expanded to beneficiaries with incomes up to 150% of the federal poverty level. LIS lowers premiums and out-of-pocket costs for prescription drug coverage.
• From 2024-2029, annual Part D premium increases will be capped at 6%.

Starting in 2025:

• There will be a $2,000 annual cap on drug out-of-pocket costs. This could save beneficiaries $400 each year on prescription drug costs. Enrollees with the highest out-of-pocket drug costs could save $2,500 per year. In addition, the Medicare Prescription Payment Plan provision will allow enrollees to pay their out-of-pocket prescription costs in the form of fixed monthly payments over the course of the plan year (instead of all at once).

“These key provisions will help promote equitable aging by making vital medications affordable for more older Americans,” says Josh Hodges, NCOA’s Chief Customer Officer. “Reducing drug costs will serve to improve the Medicare program now and ensure it remains strong and solvent for future enrollees.”

The Inflation Reduction Act also extends premium subsidies for the Affordable Care Act (ACA) Marketplace into 2025. As a result, an estimated 10 million people will save about $700 annually on their health care premiums.

Are you 65—or about to turn 65? Check out our 5 Steps to Getting Started With Medicare.

Source

1. Stacie B. Dusetzina, PhD et al. JAMA Network. Cost-Related Medication Nonadherence and Desire for Medication Cost Information Among Adults Aged 65 Years and Older in the US in 2022. May 18, 2023. Found on the internet at https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2805012