By Shannon Benton, Executive Director
Retirees’ budgets take a beating when prescription drug prices rise faster than the annual cost – of – living adjustments (COLAs). But new legislation moving in the Senate would address that problem. The drug bill would require drug manufacturers to pay rebates when prices rise faster than inflation. Lobbying groups for drug manufacturers don’t like the idea.
The Senate Finance Committee recently passed The Prescription Drug Pricing Reduction Act out of committee and now it heads to the floor for further action. The bill, which has support of both Democrats and Republicans would, among other things, cap drug prices based on the rate of inflation.
Medicaid already uses this strategy to lower drug costs, and pays much lower prices than Medicare for the same drug. In June we reported that Medicare spending on the highest price category of prescription drugs, called “specialty drugs,” increased from $8.7 billion in 2010 to $32.8 billion in 2015. Spending on the same drugs under Medicaid, the program that provides healthcare for low-income Americans, grew much more slowly over the same period, rising from $4.8 billion to $9.9 billion.
TSCL’s surveys have found that moving Medicare Part D to a pricing system that has similarities with Medicaid has strong support among older adults. Seventy percent of those who participated in our 2019 Senior Survey support allowing Medicare to negotiate prices for prescription drugs using a similar system to Medicaid’s.
The Senate bill also would change Medicare Part D by adding an out-of-pocket maximum for beneficiaries of $3,100 starting in 2022. No such out-of-pocket cost cap currently exists. According to our 2019 Senior Survey, about one-in-five survey participants report out-of-pocket spending this high for prescription drugs. Advisor editor Mary Johnson estimates that this legislation would protect almost 14 million Medicare beneficiaries from out-of-pocket drug costs exceeding $3,100 in the first year of enactment if signed into law.
In addition, the bill would help finance Part D benefits. The nonpartisan Congressional Budget Office estimates the bill will save Medicare $85 billion over a decade and save beneficiaries $27 billion in out-of-pocket costs over the same period.
PhRMA, the drug industry’s lobbying group, called the bill “the wrong approach to lowering prescription drug prices” and said it “imposes harmful price controls in Medicare Part D.” But with drug prices for many brand and specialty drugs running into the hundreds and even thousands of dollars for a single fill, TSCL believes that restricting the rate of increase on prescription drugs, and capping out-of-pocket costs, could help save lives and improve the health of older Americans.
In the months ahead, The Senior Citizens League will continue to work for enactment of legislation that would strengthen Medicare and lower costs for current and future beneficiaries. For progress updates, follow The Senior Citizens League on Twitter.
Sources: The Prescription Drug Pricing Reduction Act of 2019, Description of the Chairman’s Mark, Senate Committee on Finance, July 25, 2019. “GOP Senators Distance Themselves From Grassley and Trump’s Efforts to Cut Drug Prices,” Emmarie Huetteman, Kaiser Health News, July 25, 2019.