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Will CMS reduce people’s Part D drug costs?

Written by Diane Archer

A recent article by Sarah Jane Tribble in Kaiser Health News suggests that people with Medicare may see their out-of-pocket costs for prescription drugs shrink. The Centers for Medicare and Medicaid Services (CMS) is looking into how it might pass along certain drug discounts to people in Medicare Part D drug plans. But, will CMS reduce people’s drug costs or will drug manufacturers, insurers and Pharmacy Benefit Managers (PBMs) make sure CMS does not?

A CMS fact sheet suggests that drug companies are handing out additional drug discounts to PBMs and insurers after people fill their prescriptions. Unlike CMS, which Congress has forbidden from drug price negotiation, PBMs and insurers can extract money from drug manufacturers to put their drugs on a health insurer’s list of covered drugs or to otherwise promote them. The insurers are supposed to let CMS know about any discounts insurers and PBMs receive, and the discounts are then factored into the Part D premium.

CMS claims in its “fact sheet” that these money transfers between drug manufacturers and insurers keep Medicare premiums down. At the same time, CMS acknowledges that these after-purchase discounts drive up people’s out-of-pocket drug costs and Medicare overall spending. Since these discounts only come after people buy their drugs, copays on these drugs are often higher than they would be were the discounts factored in before purchase.

Under the current system, insurer and PBM incentives can drive up costs for people with Medicare. For example, PBMs and insurers have good reason to put expensive drugs on the Medicare Part D formularies when they can make more money off of them than off of less costly drugs; they keep less costly drugs off formularies when the drug companies pay them to do so.

With PBMs and insurers getting big rebates from drug manufacturers to promote costly drugs, drug manufacturers may set drug prices higher to offset those rebates. It’s difficult to understand how a CMS policy change can bring down costs for people in Medicare Part D when it cannot limit the prices drug companies can set for their drugs.

The PBMs are arguing against CMS policy changes, claiming that they will drive up the Medicare Part D premium. That may very well be true. Policy changes could make Medicare Part D more expensive for people with Medicare until Congress empowers Medicare to regulate drug prices.

The only way to protect people needing drugs from high out-of-pocket costs is to allow the federal government to regulate prices. If you want Congress to rein in drug prices, please sign this petition.

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