In a groundbreaking move, the U.S. Department of Health and Human Services (HHS) recently announced actions to reduce healthcare costs significantly. This move is part of the implementation of President Biden’s lower-cost prescription drug law – the Inflation Reduction Act (IRA). This law has already started to provide financial relief to covered seniors and people with disabilities, saving them hundreds of dollars annually.
The Role of the Centers for Medicare & Medicaid Services (CMS)
The Centers for Medicare & Medicaid Services (CMS) released revised drug price negotiation guidance as a critical part of this initiative. This guidance is instrumental in realizing the objectives of the IRA, which aims to counter the high prices set by Big Pharma and allow Medicare to negotiate lower drug prices on behalf of people with Medicare.
The Biden-Harris Administration’s Stance on Pharmaceutical Companies
The Biden-Harris Administration has been unequivocal in its stance against exorbitant drug prices. According to Xavier Becerra, Secretary of Health and Human Services, pharmaceutical companies have been reaping record profits for decades. In response, the Administration is taking steps to negotiate better drug prices for American families. Despite resistance from pharmaceutical companies, the Administration remains undeterred in its mission to lower drug costs.
Medicare’s Direct Negotiation with Drug Manufacturers
Starting this year, Medicare has begun negotiating directly with drug manufacturers to lower the price of high-cost prescription drugs. CMS will announce the first ten drugs selected for negotiation by September 1, 2023. The first round of talks will occur between 2023 and 2024, with the negotiated prices becoming effective in 2026.
Process for Drug Price Negotiation
In March, CMS released initial guidance on the process for drug price negotiation. The agency outlined how to select drugs for negotiation and conduct them. Public input has informed this guidance and aims to agree on a maximum fair price for a selected drug with participating manufacturers. This approach ensures that Medicare beneficiaries can access innovative, life-saving treatments at lower costs for them and Medicare.
Impact on Insulin Costs
One notable action HHS took is President Biden’s cap on insulin costs at $35 per month. This cap will apply to people who get their insulin through Medicare Part B and Medicare Advantage with a traditional pump starting from July 1, 2023. This builds on the benefits of the Inflation Reduction Act’s $35 monthly cap on insulin costs for people with Medicare Part D. The rules for Part B and Part D are estimated to have saved 1.5 million beneficiaries an average of $500 per year if they had been in effect in 2020.
FAQs about the Inflation Reduction Act’s Medicare Drug Price Negotiation Program
The Inflation Reduction Act of 2022 includes several provisions to lower prescription drug costs for people with Medicare and reduce drug spending by the federal government. It requires the Secretary of Health and Human Services to negotiate prices with drug companies for certain drugs covered under Medicare Part D and Part B.
The drugs that qualify for price negotiation are those covered under Medicare Part D, single-source brand-name drugs, or biological products without therapeutically-equivalent generic or biosimilar alternatives. They must also be at least seven years (for small-molecule drugs) or 11 years (for biologics) past their FDA approval or licensure.