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- Ten drugs covered by Medicare will soon be subject to price negotiations.
- Some drug-policy analysts are skeptical about the Biden administration's claims about savings.
- Patients with private health insurance aren't likely to see a drop in costs from the negotiations.
- This article is part of "Big Trends in Healthcare," a series exploring the top trends shaping the future of the industry.
On August 29, the federal government released a list of 10 drugs covered by Medicare that will soon be subject to price negotiations. It's a historic change in the way the federal government pays for pharmaceuticals — until now, the federal government has had no say in drug prices — and President Biden has touted the Inflation Reduction Act, the law that made the Medicare price negotiations possible, as a win for consumers.
The list includes drugs like Januvia for diabetes, Entresto for treating heart failure, and Eliquis, which treats and prevents blood clots.
"When implemented, prices on negotiated drugs will decrease for up to 9 million seniors. These seniors currently pay up to $6,497 in out-of-pocket costs per year for these prescriptions," Biden said in a statement.
But some drug-policy scholars and analysts are skeptical of the administration's claims.
Lower drug costs will benefit Medicare — but won't necessarily mean direct savings for patients
In addition to negotiating Medicare drug costs, the IRA will require drug companies to pay rebates or offer partial refunds to the Centers for Medicare and Medicaid Services on any drugs for which they hike prices beyond the rate of inflation. All told, the Congressional Budget Office has estimated that the IRA provisions related to healthcare will save the government $237 billion in the coming decade.
While that's meaningful for federal-government spending, it doesn't necessarily translate to lower costs for consumers, Juliette Cubanski, the deputy director of the Program on Medicare Policy at KFF, said.
"The program is really designed to save Medicare money," she told Insider. "Patients could see some lower out-of-pocket costs, but that's less certain."
Jeffrey Davis, the health policy director at McDermott+ Consulting, told Insider that the focus of Congress and the Centers for Medicare and Medicaid Services is the consumer, "in terms of trying to make sure that consumers don't pay a higher price than they need to for drugs." But attempting to do that through drug-price negotiations and rebates is not an exact one-to-one cost-reduction plan.
"The goal is that, indirectly, the rebates will lead to lower premiums," Davis said.
Other healthcare researchers assert that the IRA's prescription-drug provisions will lower patient spending.
"The total price of a drug is made up of two prices: the net price, paid by Medicare, and the out-of-pocket price paid by the patient," Richard Frank, the director of the Brookings Schaeffer Initiative on Health Policy, told Insider. "If both of those fall" — as the IRA measures intend — "how can that not benefit patients?"
The pharmaceutical industry trade group, Pharmaceutical Research and Manufacturers of America, is of a different mind. It doesn't believe patients, especially seniors, will see all of the promised price reductions, according to Nicole Longo, senior director of public affairs for PhRMA.
Longo said the price-setting provisions will drive research and investment away from treatment options for Medicare patients. She added, "The bottom line is government price setting is bad policy that will leave patients with less access to medicines and fewer treatment options."
But the effects of these provisions are years down the road, so we don't yet know what direct benefits, if any, consumers will see.
Drug-price negotiations could have 'echo effects' for those with private insurance, but it's too soon to tell
Patients with private health insurance — which is most Americans — aren't guaranteed to see any drop in costs from the federal government's negotiations.
But Robin Feldman, a professor and expert in health and medicine at the University of California Law School, told Insider that Medicare negotiations could have "echo effects" for broader drug costs. If drug companies won't come to the negotiating table to lower drug prices paid by private insurers, those insurers could take the companies' drugs off their lists of covered medications.
Or, if private insurance companies don't negotiate drug prices down for their patients, patients in some cases could seek out different insurance.
Feldman's hope is that the federal government's initiatives, combined with pressures from private companies and state programs, will ultimately put the squeeze on pharmaceutical companies and force them to lower drug costs for everyone.
"Increasingly there are more options for purchasing drugs," Feldman said, noting lower-cost drugs are available through Mark Cuban's Cost Plus Drugs, Costco, and Amazon.
"These are not full solutions, but they are the beginning of cracks in the facade" of drug companies' constant price hikes, Feldman said.
Still, she cautions that it will be years before it's clear how much patients will save on prescription drugs. Pharmaceutical companies will be using that time to strategize.
"Whether you're a taxpayer or a patient," Feldman said, "you need to watch your wallet."