Federal action on drug prices would offer broad benefit
As the price of prescription drugs increases, research shows that 1 in 4 Virginians struggle to afford prescription drugs, with 27% not filling a prescription and cutting pills in half due to concerns about the cost.
About 1.6 million Virginia residents are enrolled in Medicare, and most of them are unaware Medicare is currently prohibited from negotiating prescription drug prices due to a Medicare Part D non-interference clause. Several studies indicate that allowing Medicare to negotiate directly with drug manufacturers would lower prescription drug costs while rewarding innovation and breakthrough of new treatment options. This proposal has strong bipartisan public support.
On Nov. 2, House and Senate Democrats reached a breakthrough agreement on lowering prescription drug prices for seniors and families in the Build Back Better legislation as part of the $1.75 trillion reconciliation bill. This legislation includes the provision for Medicare to negotiate prices for high-cost prescription drugs, such as drugs seniors get at the pharmacy counter through Medicare Part D and drugs administered in a doctor’s office through Medicare Part B. This legislation needs to be passed in Congress for it to become law.
In its implementation, negotiations will be held annually for 250 prescription drugs, including the 125 most costly drugs offered by Medicare Part D plans or sold anywhere in the commercial market. This authority would apply to brand-name drugs with little or no competition from generic or biosimilar medicines and all insulin products. Drugs that are new to the market may be eligible for negotiation if the wholesale acquisition cost, also called the list price, is equal to or greater than the U.S. median household income ($78,500 in 2020).
Medicare drug negotiations will directly lower out-of-pocket costs for its beneficiaries in Virginia by lowering beneficiary premiums and cost-sharing.
Currently, there is a cap of more than $6,000 a year in cost-sharing. Negotiations and current proposals ensure that seniors and people with disabilities never pay more than $2,000 a year for their drugs under Medicare Part D. The Congressional Budget Office estimates that drug prices would reduce by 57-75%.
The benefits for the federal government cannot be overemphasized.
According to the Congressional Budget Office, negotiations are estimated to save the federal government more than $500 billion over 10 years. This includes direct savings to the Medicare Part D program,
a reduction in spending for the Federal Employees Health Benefits Program and increased government revenue from employers using savings from reduced premiums to fund taxable wage increases for their workers.
Experts who oppose allowing Medicare prescription drug price negotiations have often argued that it would lead to limited drug options for Medicare beneficiaries, increased drug prices and result in a lack of innovation.
A recent Kaiser Family Foundation poll disagrees and indicates that 90% of people support the government’s ability to negotiate lower drug prices. Even with lower prices, the pharmaceutical industry profits would ensure that the sector remains attractive enough for future investments. In addition, the federal government subsidizes drug development through its funding of research and development.
Finally, Medicare drug negotiations would have a direct effect on Virginians. It would save federal dollars, make drugs more affordable for patients and provide an opportunity to address other health care issues while increasing accessibility and affordability within the commonwealth of Virginia.