Drug Industry Continues to Fight It; President Biden Proposes to Expand It
The Inflation Reduction Act of 2022 (IRA), signed into law by President Biden on August 16, 2022, has already provided cost-savings for Medicare beneficiaries through provisions that took effect last year in 2023, including a monthly cap of $35 for covered insulin and free vaccines for certain conditions, as outlined in previous CMA Alerts (e.g., here and here).
As outlined in another CMA Alert (Oct. 26, 2023), additional changes are now in effect as of January 1, 2024. As noted on the www.medicare.gov website:
- If you have drug costs high enough to reach the catastrophic coverage phase in your Medicare drug coverage, you won’t have to pay a copayment or coinsurance, starting in 2024. (Note that according to Medicare, this provision will effectively cap out-of-pocket costs between $3,300 and $3,800 this year).
- Extra Help affording prescription drug coverage (the Part D Low-Income Subsidy (LIS) program) has expanded to cover more drug costs for people with limited resources who earn less than 150% of the federal poverty level, starting in 2024. People who qualify for Extra Help generally will pay no more than $4.50 for each generic drug and $11.20 for each brand-name drug.
In 2025, the annual Part D Out-Of-Pocket cap will be lowered to $2,000. Individuals will also have the option to pay out-of-pocket costs in monthly installments over the plan year, instead of when they happen (see more information about the Medicare Prescription Payment Plan on CMS’ website). As outlined in a KFF report “Millions of People with Medicare Will Benefit from the New Out-of-Pocket Drug Spending Cap Over Time” (Feb. 2024), while a smaller number of beneficiaries with high drug costs will benefit from this cap in a given year, “[o]ver the course of several years […] far more Part D enrollees will stand to see savings from this new out-of-pocket spending cap than in any single year.” Further, “[a]lthough KFF polling shows that a relatively small share of older adults is aware of the Inflation Reduction Act’s $2,000 cap on out-of-pocket drug costs for Part D enrollees that takes effect in 2025, millions of them will benefit from this cap in the years to come.”
In addition, the drug price negotiation program created by the IRA allows Medicare to use its bargaining power to negotiate the prices of certain prescription drugs for the first time. The first group of ten drugs subject to negotiation have been announced, and initial offers were sent to manufacturers of those drugs on February 1, 2024. Earlier this month, the Department of Health & Human Services (HHS) announced that all manufacturers participating in this first cycle of negotiations have responded with counteroffers. Negotiations regarding prices for this first batch of drugs will continue until August 2024, with the negotiated prices effective in January 2026. See KFF’s “FAQs about the Inflation Reduction Act’s Medicare Drug Price Negotiation Program” (Jan. 2024). Note that the number of drugs subject to price negotiation per year will increase to 15 in 2027, 15 Part B and D drugs each in 2028, and 20 drugs each in 2029 and beyond.
HHS’ Office of the Assistant Secretary for Planning and Evaluation (ASPE) also recently released several reports detailing the cost comparison of prescription drugs in U.S. and certain other countries, as well as detailing the financial protections available through the LIS. These reports, and other information about the IRA prescription drug provisions are available at a new HHS website at: https://www.hhs.gov/inflation-reduction-act/index.html. For additional consumer-oriented materials, including in languages other than English, see this CMS resource page.
Drug Industry Fights the Law While President Biden Pushes to Expand It
As outlined in a recent article in the Washington Post titled “How Big Pharma is fighting Biden’s program to lower seniors’ drug costs” by Tony Room (March 11, 2024), we generally pay much higher costs for drugs in our country:
Generally, Americans do pay more for prescription drugs: Among the 10 medications that the United States has targeted for negotiation, prices can range from three to eight times higher than in Canada, Japan and other industrialized countries, according to a January report from the Commonwealth Fund, a research nonprofit, which studied 2021 data.
The article describes the pharmaceutical industry’s efforts to thwart the government from negotiating fair drug prices:
Under siege in Washington, the drug industry has focused its attention on the courts: Since last year, companies and lobbying groups have filed nine lawsuits in Delaware, Ohio, New Jersey, Texas and the District of Columbia. While pharmaceutical giants have so far failed to score a victory, they have signaled they do not plan to waver in their campaign. […]
The legal challenges are part of a wider-ranging offensive by the pharmaceutical industry, long seen as one of the most powerful political forces in the nation’s capital. Since 2022, drugmakers and other companies have spent more than $761 million to lobby lawmakers and regulators, according to data from OpenSecrets, a money-in-politics watchdog.
Despite the drug industry’s efforts to derail the law, President Biden has proposed to expand it both within and beyond the Medicare program. As outlined in a White House document titled “FACT SHET: President Biden Takes New Steps to Lower Prescription Drug and Health Care Costs, Expand Access to Health Care, and Protect Consumers” (March 6, 2024), President Biden has proposed to increase the amount of drugs negotiated by Medicare annually from 20 to 50. He also proposes to expand the $2,000 out-of-pocket cap (which will be in effect in Part D in 2025) to “all private insurance so that all Americans have the peace of mind that comes with knowing that they won’t have to choose between filling their prescription or putting food on the table.” An additional proposal would expand the IRA’s requirement that drug companies pay rebates when they increase prices faster than inflation to “commercial drug sales”.
The White House Fact Sheet also outlines a proposal to limit Medicare cost-sharing for generic drugs:
Medicare will be launching a new model to limit Medicare Part D cost-sharing for certain generic drugs to $2. As Medicare prepares to launch the model, HHS will publish a list of dozens of generic drugs for the model, including drugs like statins to treat high cholesterol, beta-blockers for high blood pressure, and platelet inhibitors to prevent blood clots. In his budget, the President is calling on Congress to limit Medicare cost-sharing to $2 for high-value generic drugs for all Medicare plans.
Conclusion
The Center for Medicare Advocacy strongly supports implementation of the consumer price protections in the Inflation Reduction Act (IRA) and will continue to help defend in the law in the courts and elsewhere. We also strongly support President Biden’s proposals to expand the scope of the IRA both within the Medicare program and beyond. It is long past time for our government to ensure that the public is paying fair prices for prescription drugs.
March 14, 2024 – D. Lipschutz