My latest on last week's news about the first round of Medicare/pharma negotiations on the first round of drugs. It's a big first step, but there's a long way to go.
https://t.co/FnTragjFNN via @NYTOpinion— Aaron E. Carroll (@aaronecarroll) August 19, 2024
The federal government has completed the audacious goal of negotiating lower prices for ten high-cost prescription drugs under the Medicare Part D program. Enabled by the Inflation Reduction Act (IRA), this initiative aims to reduce overall healthcare spending and ease the financial burden on Medicaid beneficiaries. The Centers for Medicare and Medicaid Services (CMS) reported a $6 billion reduction in spending based on the new negotiated prices, evaluated at 2023 volumes of prescriptions.
It was found that three drugs accounted for 51.4% ($3.28 billion) of the estimated savings. The much-anticipated first set of negotiations for brand-name prescription drugs under the Medicare Part D program has been completed. The 2026 Maximum Fair Prices (MFP) for the selected drugs have been established.
I was proud to support the legislation that made prescription drug negotiations and these new prices possible, saving Americans and our government billions of dollars every year.https://t.co/TSDT4sy7Wp
— Congressman Raja Krishnamoorthi (@CongressmanRaja) August 18, 2024
In 2022, we passed the Inflation Reduction Act & gave Medicare the power to negotiate drug prices.
Those negotiations are saving seniors billions of dollars in drug costs.
This bill is improving lives.https://t.co/ZDtinBO8Vt— Angie Craig (@AngieCraigMN) August 18, 2024
The IRA included provisions that allowed the Secretary of the Department of Health and Human Services to negotiate drug prices, amending the “non-interference clause” in the Medicare Modernization Act. The selected drugs had to be single-source products on the market for at least nine years if they were small molecule drugs, or 13 years if biological, by January 2026 when the MFP takes effect. These drugs were among the 50 with the highest Part D spending.
Negotiating Medicare Part D savings
The Act established an upper limit for negotiation. For drugs approved less than 16 years earlier, this limit is 75% of the non-federal average manufacturer (NFAMP) prices.
Perhaps I shouldn't be surprised, but it's quite something that this explainer op-ed presents new Medicare negotiated drug prices against existing list prices with no context. https://t.co/smhKky9A2r
— Ben Ippolito (@ben_ippolito) August 19, 2024
For those approved more than 16 years ago, the limit is 40% of the NFAMP. On August 29, 2023, the Department of Health and Human Services announced the ten drugs selected for negotiations. These drugs accounted for nearly $50.5 billion in gross Part D drug spending and were used by 9.7 million Medicare beneficiaries.
The CMS has reported a reduction in spending of $6 billion based on 2023 prescription volumes. The analysis involved estimating net spending attributable to the negotiations in Part D, calculating spending net of rebates in the absence of the IRA, and assembling data from sources like the CMS Drug Spending Dashboard, MedPac, and SSR Health to estimate pre-IRA net prices. The estimates of savings are drawn from reviewing data on sales, rebates, and prices from multiple sources, combining data for each drug to approximate pre-IRA net prices and spending, and applying the announced MFPs to recent volume metrics to predict spending at negotiated prices.
The government’s negotiation of prescription drug prices under the Medicare Part D program marks a significant step toward reducing healthcare costs. The initial set of negotiations has yielded substantial savings, demonstrating the potential impact of federal involvement in drug pricing.
- NYTimes.”Opinion | A $6 Billion Breakthrough or a Drop in the Bucket?”.
- BBC.”What are the 10 drugs negotiated by Medicare?”.
- Brookings.”Impact of federal negotiation of prescription drug prices”.