How much will Medicare price cuts on 10 of the most expensive drugs, including those for diabetes, cardiovascular disease and arthritis, save seniors at the pharmacy? And when will they see the savings?
It’s a major step in the Biden administration’s efforts to reduce the skyrocketing costs of prescription drugs in the United States. But much remains to be addressed, including the burning question: Will seniors see the savings if drugmakers can successfully block negotiations in court?
“Lower prescription drug prices are very popular with the public, but the future is uncertain,” said Lawrence Gostin, director of the O’Neill Institute for National and Global Health Law at Georgetown University. “The pharmaceutical industry and its allies have filed a barrage of lawsuits against price negotiations.”
So far, the courts have roundly rejected legal challenges.
Who benefits from falling prices?
More than 65 million people in the United States are enrolled in Medicare. Most people won’t see direct savings until the rates go into effect in 2026.
The Biden administration said Thursday it had negotiated price reductions of between 38% and 79% for each of the 10 most expensive drugs in the program.
This includes Eliquis, a popular blood thinner from Bristol Myers Squibb, which had a list price of $521 for a 30-day supply in 2023; Enbrel, a rheumatoid arthritis drug from Amgen, which had a list price in 2023 of $7,106; and NovoLog, a diabetes drug from Novo Nordisk, which had a list price of $495.
More than 8 million people enrolled in Medicare take one or more of the negotiated drugs, said Tricia Neuman, senior vice president of KFF, a nonprofit group that studies health policy issues.
It’s hard to estimate how much the federal government will save policyholders and American taxpayers. Biden administration officials have declined to disclose the net price, which is how much Medicare typically pays for prescription drugs after all discounts and rebates. (Net prices negotiated between insurers and drugmakers often involve confidential agreements.)
However, the administration projects that the negotiated prices will save seniors $1.5 billion in out-of-pocket costs, as well as $6 billion for the Medicare program — a 22 percent reduction in total net spending, said Stacie Dusetzina, a professor of health policy at Vanderbilt University in Nashville, Tennessee.
Implementing the new pricing for Medicare Part D plans will take time because it will affect what patients, the government and plans pay.
“You are doing a complete renovation of these different components of the service,” Dusetzina said.
How much will Medicare enrollees save?
When the prices go into effect, the seniors who are likely to see the most savings are those whose Medicare Part D plans require them to pay a percentage of the total cost of the drug before rebates, also known as coinsurance, Neuman said. That’s different from a copay, which is a fixed amount — say $10 — for a drug, regardless of its total cost.
“People who take these drugs are expected to save money, but the amount varies from plan to plan and whether they are enrolled in a plan that charges coinsurance or co-payments,” Neuman said.
Most people enrolled in Medicare “may not save much,” especially if they take one of the 10 selected drugs, Gostin said, but the lower prices could mean lower premiums for everyone.
“For me, the most important benefits of drug price negotiations are that lower drug costs will benefit all sectors that benefit from lower prices,” he said.
What about the $2,000 prescription price cap?
Currently, the savings only apply to those taking one of the 10 drugs, but that is subject to change.
As provided for in the Inflation Reduction Act (IRA), the federal government can negotiate lower prices on several other drugs each year.
In 2027, negotiated prices will go into effect for 15 additional drugs, followed by 15 more in 2028 and 20 more each year thereafter. It is likely that more seniors could save significantly more in the coming years.
By February, the government is expected to announce the next 15 drugs that will be subject to negotiations.
People may not have to wait until 2026 or 2027 to get a tax break. A $2,000 annual cap on out-of-pocket prescription drug costs, included in the IRA, will take effect next year.
“This is the next big change coming,” Dusetzina said. “It’s important to understand that the 2025 benefit change will have already improved the situation for seniors, so by the time the negotiated prices go into effect, it may not change the cost for people who are using more drugs, but it will help everyone who uses Medicare Part D.”
Many people don’t even reach the $2,000 out-of-pocket limit, Neuman said, but that’s OK.
“The whole idea of not having to pay over $2,000 is a huge relief, because you never know when you’re going to get prescribed a really expensive medication,” she said.
Affordable drugs ‘in play’
There is a risk that all of this could be upended if drugmakers succeed in their lawsuits seeking to overturn Medicare’s negotiation program, Gostin said.
Indeed, the savings from the Medicare negotiation program are expected to fund much of the $2,000 out-of-pocket cap. Currently, that cap would be covered by other provisions of the IRA, such as a rebate for drugmakers that raise their drug prices faster than inflation, and Medicare and drugmakers would shoulder a larger share of the costs.
According to Georgetown University’s Health Care Litigation Tracker, more than a dozen lawsuits have been filed to overturn the law. A few have already been dismissed by the courts, but several are still pending.
“Ultimately, these cases will go to the Supreme Court, which has been hostile to health and safety regulations,” Gostin said.
Another factor to consider is the possibility that former President Donald Trump wins the next presidential election, Neuman said.
Trump’s position on the IRA and the Medicare negotiation clause remains unclear, Neuman said.
She noted, however, that one of the goals of Project 2025 is to repeal the law.
The 2025 Project is a sweeping collection of right-wing ideas aimed at transforming the American government. Although it was written by former Trump officials in anticipation of a second term, Trump has said he knows “nothing” about it.
“If President Trump wins the election, he could dismantle the price negotiation program,” Gostin said. “Overall, the future of affordable medicines for all Americans is at stake.”
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