Real Medicare drug savings in Democrats’ bill — but not overnight
WASHINGTON (AFP) – Medicare enrollees taking expensive drugs could save thousands of dollars a year as Democrats sweep …
Washington (AFP) – Medicare enrollees who take expensive drugs could save thousands of dollars a year under the Democrats’ Comprehensive Social Agenda Act, but those profits won’t come overnight. Instead, they will build gradually over the course of the decade.
The prescription drug compromise in the bill, which was revealed late last week, has barely survived a lobbying campaign from the drug industry. Experts who analyzed the complex plan say it will also provide people with private insurance some protection from the rising cost of their medication.
“The core is that this will generate significant savings for seniors and taxpayers,” said Lee Purvis, director of health care costs research at the AARP Institute for Public Policy. “This will bring down the price of expensive and widely used prescription drugs, and that will have an impact on everyone.” The Institute is the policy arm of AARP. The group’s advocacy process played a leading role in lobbying for drug price controls.
If the legislation is passed, the savings would be focused among patients with serious chronic diseases such as cancer, diabetes, multiple sclerosis and rheumatoid arthritis, along with those taking expensive combinations of drugs to try to control accumulated health problems.
It will take about a year for the first tangible benefits to appear. In 2023, the bill would mandate a check on annual price increases for established drugs, as well as cost limits aimed at keeping insulin on hand. A huge development will follow in 2024: the first-ever petty cash cap for nearly 50 million seniors in Medicare’s Part D pharmaceutical program.
A year later, the health policy hub of legislation was launched. Seniors will see the first fruits of Medicare’s negotiations with drug companies, for no more than 10 drugs to start with, but there is no numerical limit to the negotiated insulin prices.
Democratic campaign strategists hoping for a quick political blow to next year’s midterm elections may be disappointed. The terms and conditions for Medicare’s 2022 prescription drug plans are already set, so immediate changes could lead to disruption.
“It takes time to implement these policies,” said Tricia Newman, a health care expert with the nonpartisan Kaiser Family Foundation. “I don’t think consumers will see much of an impact before the midterms.”
The next timeline for introducing drug rulings is based on interviews with experts at the Kaiser Foundation, the AARP Institute for Public Policy, the Brookings Institution and Affordable Drugs patients, as well as examinations with Democratic staff on the House Ways and Means Committee.
In 2023, the bill will impose penalties on drug companies that raise fixed drug prices above inflation, a common pattern in most years. To discourage transferring costs to people with private insurance, penalties will take into account the rates charged to them as well.
For Medicare recipients whose cost-sharing is based on a percentage of the drug’s price, what they pay out of their own money will not rise faster than inflation.
In addition, Medicare enrollees with diabetes will get a combined $35 per month for all insulin products covered by their prescription plan. People with private insurance will have access to $35 for at least one insulin product of each type and dose.
Insulin amounts of $35 can save hundreds of dollars for some patients.
Annual limitation on consumer cost sharing
Starting in 2024, people in Medicare will finally have a limit on what they pay out of their pocket for drugs. This standard feature of private insurance is currently missing from the program.
Medicare will be capped at $2,000 per year, and the Kaiser Foundation estimates that more than one million seniors currently have costs above that level, averaging about $3,200 in 2019.
Among them is David Mitchell, president of the advocacy group Patients for Affordable Drugs. Mitchell, who fights multiple myeloma, says one of the cancer drugs he uses alone costs him $15,000 a year through Medicare. “If you’re in that group – like me – that’s a big deal,” Mitchell said.
Eventually, Medicare patients will be able to spread out their in-person payments in manageable increments, a consumer-friendly feature called “smoothness.” Mitchell said his first payment this year was about $3,300.
Behind the scenes, Medicare’s prescription benefits design will get an overhaul to create more incentives for insurance companies to bargain with drug companies over expensive drugs.
Pharmaceutical price negotiations
The nearly 20-year-old law that created Medicare’s prescription drug benefit expressly prohibits the program from participating in price negotiations. The opening of this dam will begin in 2025, but slowly at first.
Although it remains opposed to the legislation, the pharmaceutical industry has won significant concessions limiting the number of drugs whose prices can be negotiated, exempting some drugs, and scrapping a previous idea of using lower prices from abroad as a measure of Medicare. Companies will still be able to set launch prices for new drugs.
In 2025, Medicare will reveal the first batch of drugs at negotiated prices, limited to 10 drugs, not counting insulin products. But the number of negotiated drugs will continue to grow, reaching 100 or more in a few years. The House Ways and Means Committee says it expects Medicare to be able to cut prices 25% to 60%.
Economist Richard Frank of the Brookings Institution says he estimates that about half of the top 25 Medicare drugs will be eligible for negotiations now.
“There’s really, there’s going to be some effect on people who take those medications in a way that you’re going to feel,” Frank said. “At the end of 10 years, you will probably have 150 properties negotiated. They should be big sellers and be on the market for a while.”
For Democratic lawmakers, there remains a difficult effort to pass the legislation.
Although lowering drug costs has support across the political spectrum, it is unclear whether Democrats confused in messaging will be able to effectively explain their multi-layered legislation to consumers.
“This is a very important question,” said Frederic Isassi, executive director of Families USA, an advocacy group that supports the plan. “The Democrats in Congress have to have a very clear and disciplined strategy on that.”
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