September 1, 2023

On August 30, 2023, Kaiser Health News reported (“5 Things to Know About the New Drug Pricing Negotiations”):

“The Biden administration has picked the first 10 high-priced prescription drugs subject to federal price negotiations, taking a swipe at the powerful pharmaceutical industry. It marks a major turning point in a long-fought battle to control ever-rising drug prices for seniors and, eventually, other Americans.

“Under the 2022 Inflation Reduction Act, Congress gave the federal government the power to negotiate prices for certain high-cost drugs under Medicare. The list of drugs selected by the Centers for Medicare & Medicaid Services will grow over time.

“The first eligible drugs treat diabetes, blood clots, blood cancers, arthritis, and heart disease — and accounted for about $50 billion in spending from June 2022 to May 2023.”

These price negotiations are a significant policy change. As KHN noted:

“Medicare has long been in control of the prices for its services, setting physician payments and hospital payments for about 65 million Medicare beneficiaries. But it was previously prohibited from involvement in pricing prescription drugs, which it started covering in 2006.

“Until now the drug industry has successfully fought off price negotiations with Washington, although in most of the rest of the world governments set prices for medicines. While the first 10 drugs selected for negotiations are used by a minority of patients — 9 million — CMS plans by 2029 to have negotiated prices for 50 drugs on the market.”

In a piece published August 30, 2023 at The Conversation (“Medicare starts a long road to cutting prices for drugs, starting with 10 costing it $50.5 billion annually – a health policy analyst explains why negotiations are promising but will take years”), Professor Simon Haeder observed:

“If the negotiations proceed as planned, the drug-price-negotiation provision is expected to save the U.S. government about $98.5 billion by 2031 by allowing it to pay less on prescription drugs for Americans on Medicare – nearly 66 million people. The Biden administration hopes that these cost savings will be passed down to Americans 65 and older through reduced Medicare Part D premiums and lower out-of-pocket costs.

“The Inflation Reduction Act provides additional benefits for older Americans, including limiting their out-of-pocket expenses for prescription drugs to no more than $2,000 annually, limiting the growth of Medicare Part D premiums, eliminating out-of-pocket costs for vaccines and providing premium subsidies to low-income people ages 65 and older.

“The Inflation Reduction Act also includes a separate provision that requires drugmakers, under certain conditions, to provide the Medicare program with rebates if drug price increases outpace inflation, starting in January of 2023. That measure is expected to yield $71 billion in savings over a decade.”

Doctor Mariana Socal, an associate scientist at the Johns Hopkins Bloomberg School of Public Health, appeared on C-SPAN’s Washington Journal on August 31 to discuss the Medicare drug price negotiations.

World Health Systems Facts is a project of the Real Reporting Foundation. We provide reliable statistics and other data from authoritative sources regarding health systems in the US and sixteen other nations.

Page last updated September 1, 2023 by Doug McVay, Editor.