Last week, I laid out the Medicare prescription drug provisions in the reconciliation bill. They are noteworthy. Among other benefits, for the first time, people with Medicare Part D prescription drug coverage will spend no more than $2,000 out of pocket for their drugs, and Medicare will be allowed to negotiate the price of 100 prescription drugs through 2030. If you’re taking costly medicines, these provisions should lower your drug costs significantly.
Beginning in 2023, Medicare drug prices cannot rise faster than inflation. If they do, the manufacturer must pay a rebate to the federal government. So, you should no longer see your Part D prescription drug costs rise more than the rate of inflation. The base year for measuring cumulative price changes is 2021.
In 2024:
- if you reach the catastrophic coverage phase of your Part D coverage, meaning that you have spent $7,050 out of pocket for covered drugs, you will no longer have to pay five percent of the cost of your drugs. You will have no drug copay.
- if your income is under 150 percent of the federal poverty level, you will be eligible for full Extra Help benefits, which cover your Part D out-of-pocket costs.
- your Part D premium cannot increase more than six percent a year.
In 2025, your maximum out-of-pocket Part D drug costs will drop to $2,000 a year.
In 2026, Medicare will begin negotiating drug prices for 10 Part D brand-name drugs. The law is silent as to the drugs for which Medicare will negotiate prices, other than that they must be high-cost and have been on the market for at least nine years since FDA approval. The Secretary of Health and Human Services will choose the drugs for which prices will be negotiated.
In 2027, Medicare will negotiate drug price for 15 Part D drugs.
In 2028, Medicare will negotiate another 15 drugs in Medicare Part D and Part B.
In 2029, Medicare will negotiate the price of 20 drugs.
It’s not clear when we will know which drugs will have negotiated prices or how these prices will affect people who take these drugs. Even today, each Medicare Part D drug plan might charge you a different amount out of pocket for a particular drug, depending upon a variety of factors.
Steve Maas points out in the Washington Post, that a blood pressure medicine, lisinopril, could cost you nothing or as much as $29 at the same pharmacy with Part D. Without insurance, it costs $4 at Walmart. Maas takes a basket of drugs and reveals that, overall, at least for the five drugs he chooses, you will save a lot of money using the pharmacy at your local Giant supermarket over going to CVS, $11 v. $46.55.
How will the Secretary of HHS arrive at the negotiated price? We don’t know yet whether the Secretary will be able to achieve the deep discounts that other wealthy countries are able to negotiate or a much smaller discount. But, most likely the latter, given politics in the US. And, then there’s the question of how much of the discounts the Part D plans will pass along to their members in terms of out-of-pocket costs.
There is a price ceiling for drugs whose prices are negotiated, which depends upon how long the brand-name drug has been on the market. The lowest ceiling is 40 percent of the drug’s fair price (which there’s a formula for calculating), for drugs that have been on the market for at least 16 years. The highest ceiling is 75 percent for drugs on the market between nine and 12 years.
There is a penalty on manufacturers for non-compliance. Manufacturers must pay an excise tax of 65 percent of the prior year’s sales of that drug, which increases by 10 percent every quarter up to 95 percent. And, if the drug has a negotiated price that the manufacturer opts not to charge, the manufacturer could pay a penalty of as much as 10 times the difference between the price it charges and the negotiated price.
What does this all mean for the Medicare Part D plans? If there’s any way they can avoid including the negotiated drugs on their pharmacies, they might try to do so, because they might not profit as much from them. We know that CVS excludes some generics from its formularies, forcing enrollees to pay more for their brand-name equivalents, surely because CVS maximizes profits in that fashion.
Part D prescription drug plans have way too much freedom to take advantage of the system and drive up costs for their enrollees. Enrollees are at an enormous disadvantage because drug tiers and coverage can change at almost any time. People truly cannot choose the Part D plan that’s right for them.
Unfortunately, Congress does not have the authority to include drug price negotiation for working people in the reconciliation bill. It can only include provisions that affect the federal budget directly. As a result, millions of Americans will continue to import drugs from abroad for personal use. While it is not technically legal, to date, the government has never prosecuted anyone for doing so.
Here’s more from Just Care:
- Poll: More than 75 percent of Americans support strengthening Social Security
- Reconciliation bill would reduce Medicare drug costs
- California plans to produce generic drugs for its residents
- Mark Cuban launches low-cost drug pharmacy
- Millions safely import low-cost drugs from abroad
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