The Biden administration announced on Aug. 16, 2024, the reduced prices of it has negotiated with pharmaceutical companies over their Medicare prices.
Author
Simon F. Haeder
Associate Professor of Public Health, Texas A&M University
Provisions authorizing these negotiations were part of the , which took effect in 2022, but these lower prices aren’t scheduled to take effect until 2026.
The drugs are purchased through , a prescription drug coverage program for Americans who are 65 and older. The 10 medications were used by in 2023, and they accounted for spending. Had the negotiated prices been in place that year, the government estimates that .
To put this in perspective: Total annual spending on prescription drugs in the U.S. exceeds , and .
As a scholar who , that negotiations will end up having an substantial impact on the U.S. health care system in the foreseeable future, even if the law survives ongoing .
At the same time, I do expect that many older adults will reap substantial savings on their out-of-pocket spending on prescription drugs over the coming years. But that will primarily happen due to other provisions.
Cutting drug costs for Medicare enrollees
The allows the Centers for Medicare & Medicaid Services to negotiate prices with the companies that make some of the most expensive drugs in the Medicare program, including life-saving cancer and diabetes treatments like and .
Democrats have . Vice President Kamala Harris, who is now running for president, is making efforts to rein in drug prices part of her .
Former President Donald Trump, however, has been . Public opinion polls show .
Medicare will soon begin to negotiate prices for .
If the policy continues to move forward as planned, the drug price negotiation provision is expected to by 2031.
The Biden administration hopes that some of these cost savings will be passed down to Americans 65 and older through and lower out-of-pocket costs. The White House also hopes to reduce the federal deficit by .
Other important benefits for older adults
While negotiations over Medicare drug prices have received the most attention, the Inflation Reduction Act included other provisions that .
These on prescription drugs to no more than $2,000 annually by 2025, limiting the growth of Medicare Part D premiums, providing rebates if certain drug price increases outpace inflation, eliminating out-of-pocket costs for vaccines and providing premium subsidies to low-income people 65 and up.
Strong industry resistance, but companies negotiated
Despite their vocal opposition and their ongoing that has attacked this process, all affected U.S. drugmakers .
The daunting alternatives, including paying a penalty that could run as high as , and a requirement to pull their drugs from the Medicare and Medicaid markets, proved to be strong incentives.
However, the manufacturers of medications have been fighting the . And despite several losses, this battle , with uncertain outcomes.
Why US drug prices are so high
compared with people who live in countries with similar economies. For example, per capita pharmaceutical spending in the U.S. amounted to $1,432 compared to $1,042 in Germany and $766 in France in 2022.
The and include the overall and the . Of course, many other countries also directly set prices for drugs or .
Drug costs impose a . People who are 65 and older are , with as prescribed due to high costs.
Weighing the prospects of price negotiations
In my view, the government’s efforts are a step in the right direction. The potential for real savings for Americans 65 and older will undoubtedly grow as more drug prices are negotiated.
Yet, some real concerns remain.
Even if the negotiated lower prices survive the , it’s possible that , as Republicans have for Medicare.
The than it appears. That’s because the Medicare program and patients often on many of these drugs. These discounts will now be eliminated.
In addition, the pharmaceutical industry has a that may further limit the financial impact. Manufacturers have that they expect limited impacts on their profits.
It’s also too soon to tell if this is going to be a win for all Americans. It’s possible that Americans who aren’t covered by Medicare , even on these same drugs. Working Americans could thus wind up .
This article includes passages that were included in a previous article published on .
Simon F. Haeder does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
