Medicare Given Authority to Negotiate Drug Prices
By Rick Delaney, Chairman of the Board, TSCL
Legislation that will cut prescription drug costs by allowing Medicare to negotiate prices was recently signed into law after decades of persistent efforts by TSCL and other senior advocates. Provisions of the legislation which are outlined below were the top legislative priority of 79% of participants in our recent “Seniors Priority Plan” survey that was conducted from May-July.
TSCL supports the prescription drug provisions contained in the “Inflation Reduction Act of 2022” which would lower prescription drug costs by an estimated $288 billion over 10 years according to the Congressional Budget Office (CBO). The new legislation reduces costs in the following ways:
- Allows Medicare to negotiate drug prices with pharmaceutical manufacturers. Only certain drugs would be affected including top brands and biologic drugs without generic or biosimilar equivalents sold through pharmacies and covered under Medicare Part D.
- Limits drug price increases to the rate of inflation. From 2019 to 2020 half of all drugs covered by Medicare increased faster than the rate of inflation, according to the Kaiser Family Foundation. This provision requires drug companies to pay a rebate to Medicare if they raise prices faster than the rate of inflation.
- Caps prescription drug out-of-pocket spending by Medicare beneficiaries at no more than $2,000 in the first year. An estimated 1.4 million Medicare Part D enrollees who do not receive any Medicare Extra Help with prescription drug costs had annual out of pocket spending of $2,000 or more in 2020. Capping out- of-pocket costs will help all beneficiaries, but especially those who take high priced drugs such as medications for cancer, multiple sclerosis, and other conditions.
- Caps insulin costs at $35 per month. The cost of insulin is one of the most frequently cited causes for financial distress in the email that we have received about high drug costs. In the past three years Medicare has been testing a $35 per month limit in certain participating Part D plans, but the program was optional for insurers. This provision now requires insurers to provide this benefit.
- Expands eligibility for full Part D low-income benefits to beneficiaries with incomes up to 150% of federal poverty guidelines. Currently only beneficiaries with incomes up to 135% of the federal poverty guidelines are eligible to receive Medicare Extra Help that covers prescription drug benefits. Starting in 2024 individuals with incomes 150% of the federal poverty guides will be eligible. These individuals typically pay some portion of the Part D premium, standard deductible, and 15% coinsurance. Others with lower incomes who receive full benefits pay no Part D premium or deductible and only modest copays for prescription drugs.
- Eliminates cost sharing for vaccines. While Medicare currently pays for some vaccines, like the annual flu vaccine which is paid for under Part B, it hasn’t paid for all vaccines including those that are paid for by Part D plans, such as the shingles vaccine.
In most years, prescription drugs costs can be the fastest growing one for many Medicare beneficiaries. What is your fastest growing cost over the past year? Please let us know by taking TSCL’s 2022 Retirement Survey.
