High drug costs are burdening seniors with excessive out-of-pocket expenses and straining the Medicare program’s finances. A February 2022 study found that the U.S. pays twice as much for drugs than other countries do.
Medicare beneficiaries’ average out-of-pocket costs for certain brand name drugs rose by 40 percent between 2011 and 2015. The list price does not include discounts to Medicare drug plans but is the basis for Medicare beneficiaries’ Part D cost sharing. Of these medications, 79 brand-name drugs rose by more than 16 percent while average out-of-pocket costs went up by more than 3 percent from 2015 to 2017. In January 2022 alone, three quarters of the top 100 brand-name drugs with the highest total Medicare Part D spending in 2020 increased their list price by an average of 5.2 percent. This trend is clearly unsustainable, and some policy makers are looking for ways to rein in drug costs in the Medicare program.
The Inflation Reduction Act (IRA) (P.L. 107-169) signed by President Biden on August 16, 2022, made significant strides toward lowering cost for beneficiaries with high drug costs by 1) placing a $2,000 cap on Part D out-of-pocket costs 2) allowing Medicare to negotiate the price of 20 drugs of high cost to the Medicare program that have been on the market from 9 years (small molecule drugs) to 13 years (biologics) and 3) would require drug manufacturers to rebate to the government the amount by which a drug’s cost rises above the rate of inflation.
The National Committee supports the Elijah Cummings Lower Drug Costs Now Act, which has an even stronger negotiation provision that would:
- allow the Secretary of Health and Human Services to negotiate for up to 250 drugs the maximum fair price that pharmaceutical manufacturers could charge to Part D enrollees without incurring civil monetary penalty worth 10 times the amount of any overcharge.
- require the Secretary to negotiate a minimum of 25 drugs increasing to 50 drugs.
- require the negotiated price between HHS and the manufacturer to fall between the lowest price among selected reference countries and 120 percent of the average price across reference countries.
- unlike negotiation under IRA, Elijah Cummings bill would not restrict negotiation to drugs that had been on the market for 9 to 13 years.
- applies the Medicare negotiated price and inflation rebates to private insurance plans.
NATIONAL COMMITTEE POSITION
The National Committee supports the Elijah Cummings Lower Drug Costs Now Act provisions that do not restrict negotiation to older drugs, allow Medicare to negotiate a larger universe of drugs that the IRA, and limit the allowable negotiated price based on drug prices in other wealthy industrial countries.
The National Committee also supports policies that would lower drug costs for all drugs, not just those used by Medicare beneficiaries. To this end, we support Elijah Cummings’ provisions applying drug pricing reforms to the private market. We further urge Congress to enact reforms that would reduce expansive patent and regulatory marketing monopolies to allow generic drug competitors to come to market sooner and drive down drug costs. For example, we support shortening the marketing exclusivity (a monopoly period distinct from a patent granted through the Food and Drug Administration approval process) for biologics from 12 years under current law to seven. We favor eliminating excessive evergreening of patents and banning anti-competitive pay-for-delay agreements where brand drugs pay generics to stay off the market.
Government Relations & Policy, October 2022
[i] A formulary is a list of generic and brand name prescription drugs covered by a health plan.