10 drugs just became more affordable for Medicare recipients, but America needs far more relief

Starting today, older Americans who are enrolled in Medicare Part D prescription drug plans and take Eliquis to prevent blood clots, Jardiance to lower blood sugar levels or one of eight other widely used drugs will save a combined $1.5 billion annually on out-of-pocket costs.

Medicare’s new price-negotiating authority stems from the Inflation Reduction Act (IRA), which President Joe Biden signed into law in August 2022. Although the change is limited to Medicare, it represents a sea change in federal policy, which for decades has favored higher prices and the Big Medicine corruption that drives them.

Medicare’s new price-negotiating authority stems from the Inflation Reduction Act, which President Joe Biden signed into law in August 2022.

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Fortunately, the 10 drugs that become more affordable today represent only the first batch. The Trump administration has continued the law’s implementation and negotiated another 15 drug prices set to come online in 2027. In addition, the president has pursued one-off deals with manufacturers to offer “most favored nation” prices, using the threat of future tariffs as leverage, but these deals represent cost shifting more than cost savings.

The United States must do more to lower the cost of all prescription drugs, not just those made by manufacturers that curry favor with the president, and those costs need to be lowered for all Americans, not just those enrolled in Medicare. Otherwise, these price reductions will likely amount to just a drop in the bucket.

If Congress is serious about affordability, then members must eschew incremental changes — and instead eliminate the Big Medicine corruption that drives drug prices in the first place. Such changes would include a public Medicare Part D option as well as prohibitions on for-profit prior authorization and insurers owning pharmacies.

Since the Reagan administration, federal policymakers in both parties have embraced neoliberalism in health care (and other industries). This led to extreme market consolidation that benefited corporate monopolies at the expense of consumers, workers and taxpayers. Over a span that began with President Ronald Reagan’s second term and ended with Obama’s first, Congress passed four laws that gave Big Medicine — or private insurance conglomerates — incentives to raise drug prices.

In 1987, Congress unwisely decriminalized rebates paid by manufacturers to middlemen, disregarding accurate predictions of the corruption and higher prices that would follow if insurers and their affiliated pharmacy benefit managers (PBMs) refused to cover certain drugs unless manufacturers paid up.

The creation of the Medicaid Drug Rebate Program in 1990 sought to contain Medicaid spending by requiring manufacturers to pay their “best” rebates to state and federal governments. But in 2000 a federal agency conceded in a memo that the “ability of the Medicaid rebates to contain costs is limited … because manufacturers can charge higher launch prices … to partially offset the Medicaid rebate.”

Neoliberalism led to extreme healthcare market consolidation that benefited corporate monopolies at the expense of consumers, workers and taxpayers.

In 2003, Congress created Medicare Part D, in which the federal government pays private insurers to provide prescription drug plans to older Americans. The law gave further incentives to private insurers to favor higher-priced drugs because rebates and patients’ out-of-pocket costs are based on list prices. As with the Medicaid Drug Rebate Program, manufacturers play along because public health care programs account for almost half of U.S. prescription drug spending.

The Affordable Care Act, which Congress passed in 2010, capped Medicaid rebates, so manufacturers that already paid the maximum rebate could dramatically raise their list prices without penalty — and they jumped at the opportunity. Between 2012 and 2021, according to an analysis by the Health Cost Institute, the average cost of a 30-day supply of insulin almost doubled, from $271 to $499.

Congress took its first step toward lowering drug prices with the American Rescue Plan Act of 2021, which eliminated the rebate cap. Insulin manufacturers have since slashed list prices by up to 80% to avoid paying hundreds of millions of dollars in Medicaid rebates annually.

The IRA built on this progress by allowing Medicare to leverage its buying power to lower drug costs for older Americans and taxpayers. But one or two good provisions is no match for decades of bad laws. The IRA may even hasten the collapse of the Part D marketplace.

The number of standalone Part D plans has already fallen since the IRA passed. By authorizing Medicare to negotiate drug prices and capping annual premium increases and out-of-pocket costs, the law made Part D plans less profitable for private insurers. The Part D plans that remain are expected to hike premiums again when the premium cap expires, and that will push many enrollees out — maybe into risky Medicare Advantage plans.

Changes brought about by the American Rescue Plan Act and the IRA are too incremental.

Changes brought about by the American Rescue Plan Act and the IRA are too incremental to really make drug costs affordable. To truly make a difference, Congress, in addition to addressing Big Pharma’s brand-name drug patent abuses, needs to do the following:

Recriminalize postsale rebates. The first Trump administration finalized a rule that would accomplish this goal, but the IRA delayed its implementation until 2032.

Prohibit for-profit prior authorization. Congress should ban private insurers and PBMs from requiring prior authorization, which delays or denies coverage for drugs prescribed by doctors and pads Big Medicine’s profits.

Create a public Medicare Part D option. Congress should establish an alternative to private Medicare Part D plans, meaning that Medicare would negotiate all prices with manufacturers and pharmacies, eliminating the role of Big Medicine. Better yet, Congress should require Medicare to negotiate on behalf of all public and private payers.

For far too long, federal drug-pricing policy has benefited Big Medicine, resulting in an affordability crisis that threatens to bankrupt American families, employers and the Medicare Trust Fund. Some older Americans getting lower prices on 10 commonly prescribed drugs shouldn’t cause us to lose sight of that ongoing crisis.

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