Medicare Negotiations on Drugs Save Money and Lives

Health and Gender Policy Brief #163 | By: Geoffrey Small | September 11, 2023

Photo taken from: www.startribune.com

__________________________________

On August 29^th,  the Biden Administration announced a list of ten drugs selected for Medicare price negotiation. The Inflation Reduction Act, which was enacted last year, gives Medicare the authority to negotiate drug prices with pharmaceutical companies. The targeted drugs cost seniors a total of $3.4 billion in out-of-pocket costs during 2022, and this price negotiation will provide much needed relief to Americans who are struggling to afford their medications. The drugs that were selected are the highest in total spending for Medicare Part D recipients. They also address some of the most life-threatening diseases impacting U.S. citizens.

Policy Analysis

The JAMA Health Forum released an investigation, earlier this year, that details a hypothetical impact the Inflation Reduction Act would’ve had on Medicare drug prices, if the policy was enacted in 2018. A cross-sectional study using a policy simulation analysis between 2018 and 2022 revealed that recently mandated statutory ceiling prices would have reduced overall Medicare spending by 5%, or roughly $26.5 billion. The study noted that Medicare’s ability to negotiate drug prices has limitations. There are strict criteria that certain drugs must meet to be selected for negotiation. Also, drugs that have been reduced can become ineligible during the 2-year negotiation process it takes to go in effect. However, the reduced Medicare spending overall is still significant despite these issues.

Though cost reduction is the primary reason these drugs have been selected by Medicare for negotiation, the positive impact on healthcare for seniors is just as significant. The Whitehouse stated the targeted medications were vital treatments for diabetes, heart disease, and cancer. According to the CDC, two leading causes of death in 2022 were heart disease and cancer, and that rate has increased since 2021. Diabetes was also included in the top 10 underlying causes
of death.

A 2022 Health and Human Services report on “Prescription Drug Affordability among Medicare Beneficiaries” states that “more than 5 million [recipients] struggle to afford prescription medications.” Black and Latino adults over the age of 65 reported difficulties with affording their medications 1.5 to 2 times higher than white adults. It’s important to note that adults under 65 with qualifying disabilities or end-stage renal disease had significantly higher rates of affordability issues than adults over 65. The report also indicates that “Medicare beneficiaries with lower incomes and those under age 65 also had above-average rates of not taking needed medications due to cost.”

The Biden Administration has pursued an agenda to reduce medical costs for Medicare recipients since taking office. The Inflation Reduction Act is the cornerstone of the President’s efforts to deliver more affordable healthcare for Medicare recipients. The JAMA Network details the justification of these costs, based on scientific data, to inform U.S. citizens about the benefits of negotiating costs. Subscribing to their health forum can lead to better public awareness about the benefits of a more proactive Medicare system.

Engagement Resources: 

• https://jamanetwork.com/journals/jama-health-forum