What you need to know about drug price reform : Shots

Demonstrators outside PhRMA headquarters in Washington, D.C. protest drug companies’ lobbying to prevent Medicare from negotiating lower prescription drug prices.

Saul Loeb/AFP via Getty Images

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Saul Loeb/AFP via Getty Images

Demonstrators outside PhRMA headquarters in Washington, D.C. protest drug companies’ lobbying to prevent Medicare from negotiating lower prescription drug prices.

Saul Loeb/AFP via Getty Images

Americans pay much more than people in other countries for prescription drugs. It’s driving voters crazy, and even though lawmakers have been promising to do something about it for decades, they haven’t made much progress.

That could change as soon as this week. The Inflation Reduction Act – authored by Senate Majority Leader Chuck Schumer, DN.Y., and Sen. Joe Manchin, DW.V. – includes several provisions on drug prices and health insurance. The Senate plans to bring the bill up for a vote on Saturday, and it appears to be on track to pass through Congress and be signed into law by President Biden.

All of this is music to the ears of patients who have been saddled with expensive drugs for years.

“The out-of-pocket proposal that’s on the table right now would definitely change my life,” says Medicare recipient Bob Parent, 69, of Westbury, New York. He has type 1 diabetes and pays about $5,000 out of pocket for insulin each year, in addition to thousands more for heart medication.

Here are details on this proposal and others in the bill, as well as answers to some frequently asked questions.

What exactly is Congress changing about drug prices?

For the first time, the federal health secretary will be able to directly negotiate the prices of certain expensive drugs each year for Medicare. This starts in 2026 with 10 drugs and increases to 20 drugs by 2029. To qualify for negotiations, the drugs must have been on the market for several years.

Then there’s the proposal Parent is most excited about: People on Medicare won’t have to pay more than $2,000 a year in out-of-pocket costs for prescription drugs, which will make a big difference for seniors with certain conditions such as cancer and multiple sclerosis. This will start in 2025.

And starting next year, if drug companies raise the prices of their drugs faster than inflation, they will have to pay a rebate to Medicare. This could affect many drugs – according to an analysis by the Kaiser Family Foundation; in 2019-20, half of all prescriptions covered by Medicare increased in price faster than inflation. This provision could discourage drug companies from constantly raising prices.

Do experts think it will matter?

In fact, many health policy experts believe these changes are significant.

“This is a huge breakthrough,” says Tricia Neumann, who directs the Program on Medical Care Policy at KFF. “Congress has been talking about doing something about drug prices for decades. [This] it may not be everything everyone wants, but it’s a really big deal and will provide significant help to literally millions of people who need it.”

“It’s a huge deal,” agrees Stacey Dusecina, a professor of health policy at Vanderbilt University. “It really opens up a lot of new positions and solves a lot of problems.”

The Congressional Budget Office, which analyzed an earlier version of the bill, estimated those changes would save the government $288 billion by 2031.

Why does it take so long for many of these things to start?

For someone on Medicare who spends $10,000 a year on cancer treatment, like Neumann’s friend, the timing of these changes can be difficult to accept.

“Clearly, next year she’s going to be wondering, ‘Why am I still paying a lot of money?'” Neumann says. “Some things just can’t happen fast enough just because it takes a while to get things moving.” It will take a lot of work by federal health agencies and industry groups to get these regulations ready to go into effect.

Neumann says he understands people are eager for relief, but once provisions like the Medicare out-of-pocket limit go into effect, “it’s going to be a really big deal for people who rely on expensive drugs and for others who have seen their drug prices rise every year.”

I heard that the bill would lead to fewer new drugs. Is it true?

This is an argument made by drug manufacturers to try to scare people into opposing these changes. The pharmaceutical and health products industry spent more on lobbying Congress in 2022 than any other industry, according to the nonprofit Open Secrets. She fought hard to prevent these changes from becoming law because they would cut into their profits.

For example, PhRMA, the Pharmaceutical Research and Manufacturers of America, argued in an ad campaign that the bill’s drug pricing provisions could lead to fewer new drugs coming to market by “chilling research and development.” The trade association also pointed NPR to this industry-funded analysis from Avalere, which estimates the bill could cut drugmakers’ revenue by $450 billion by 2032.

But an analysis by the Congressional Budget Office estimates that the effect on drug development will be quite modest. About 15 of the 1,300 drugs will not be on the market in the next 30 years – that’s about 1% of new drugs. Also, most big pharmaceutical companies spend more on marketing than on research and development.

Some ads claim that Medicare will be cut. Is this true?

These ads are misleading. For example, a project called Commitment to Seniors launched a seven-figure ad campaign claiming the Senate bill would “drain nearly $300 billion from Medicare.” In fact, that amount of money is what the government is expected to save because Medicare won’t have to pay as much for expensive drugs, it’s not money that’s being taken out of the Medicare budget. So, importantly, old age benefits will not be cut.

“When people see an ad on TV from a group called Commitment to Seniors, it sounds pretty innocuous,” says Michael Beckel of Issue One, which tracks black money. It turns out that Commitment to Seniors is a project of another group, American Commitment, which has given PhRMA more than a million dollars, including $325,000 in 2020.

Beckel says it’s not unusual for the industry to engage in such tactics. “The pharmaceutical industry is a major lobbying force and a major dark money player.”

What about insulin? Would people with diabetes get help at these prices?

Insulin is often the hype drug when it comes to out-of-control prices and a life-or-death stake. Insulin prices in the U.S. are, on average, four times higher after rebates than in other countries, and about 1 in 4 diabetes patients report taking less insulin than prescribed because they can’t afford it. At this point, it’s unclear whether any of the proposed insulin price reforms — or at least the out-of-pocket costs for patients — will make it into the final bill.

The provision to cap the copay at $35 a month for people with insurance who take insulin has bipartisan support, but may not be included in the final bill.

What else is in the health bill?

The other big thing about the bill protects consumers from a potentially catastrophic change that would happen without new legislation.

People who buy insurance on the Affordable Care Act’s marketplaces — such as Healthcare.gov and the state marketplaces — will be able to keep generous premium subsidies for three more years. After these additional subsidies went into effect with the passage of the America’s Rescue Plan, the government estimated that 4 out of 5 enrollees qualified for a plan with a premium of $10 or less per month.

Krutika Amin, who works with Neumann at KFF, says it’s important that lawmakers approve this extension now because insurance companies are currently setting their rates for next year’s plans ahead of open enrollment in the fall.

“If Congress is able to extend additional subsidies before the August recess, it will help provide security to both insurance companies and the state and federal agencies that manage [the marketplaces] so we can implement it in a way that is seamless for users,” she says.

Additional plan discounts made a difference. Last year, 14.5 million people — more than ever before — got insurance on Healthcare.gov, and early analysis from HHS suggests the total number of people who were uninsured in the U.S. hit a record low in the first months of this year.

NPR Pharmaceuticals correspondent Sydney Lupkin contributed to this report.

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