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Amy Sherman
By Amy Sherman August 10, 2022

Democrats’ Inflation Reduction Act will allow Medicare to negotiate drug prices

President Joe Biden achieved a major health care promise through the Democrats' legislation that will allow the federal government to negotiate prices on some medications with drugmakers for Medicare.

Medicare is the federal health insurance program for Americans older than 65. For decades, the program has lacked the authority to negotiate drug prices, which has translated into costs that are higher than those paid by other industrialized nations. 

The legislation that passed the Senate on Aug. 7 would allow the federal government to negotiate the price of 10 drugs in Medicare Part D, the outpatient prescription drug use benefit, in 2026. In subsequent years, the number of drugs that the government could negotiate prices would rise, covering both Medicare Part D and Medicare Part B. 

The drugs subject to negotiation will be selected by the Health and Human Services secretary based on a ranking of the top-selling brand-name or biosimilar drugs covered by Medicare without generic or biosimilar equivalents, said Juliette Cubanski, deputy director of the Program on Medicare Policy at Kaiser Family Foundation.

Price negotiations won't start for a few years because the federal government needs lead time to build the capacity to address it, Cubanski said.  In fall 2023, the list of drugs selected for negotiation will be published, beginning the negotiation process between the Health and Human Services secretary and drug companies.

The list will not include brand-new drugs; the medications must have had Food and Drug Administration approval for several years. (PolitiFact's news partner Kaiser Health News is editorially independent from the foundation.)

"While it's hard to know exactly how this will play out, allowing the government to negotiate the price of drugs — even if the number of drugs subject to negotiation is limited — is expected to produce substantial savings to the federal government and lower out-of-pocket costs for beneficiaries," said Cubanski. "And the savings will grow over time as the number of drugs subject to negotiation increases."

Joe Antos, an expert on health care policy and Medicare at the American Enterprise Institute, a conservative think tank, said the bill did not repeal the ban on Medicare negotiating prices, but rather created an exception for the selected drugs. 

"These drugs may not be the highest-price drugs, since the selection is from the biggest sellers (price time quantity)," Antos said. "So, there is a lot of Medicare money at stake, and the feds will benefit the most from savings. It is a big deal."

For Part B drugs, beneficiaries pay 20% of the cost, so a reduction in a Part B drug cost gives the federal government 80% and the beneficiaries 20% of the total savings, Antos said. For Part D drugs, coinsurance will presumably be based on the new regulated price; if coinsurance is 20%, the beneficiary saves 20% of the difference between the unregulated price and the regulated price.  

Also, the out-of-pocket max for Part D drugs will be capped at $2,000 a year.  

"Many beneficiaries who don't use the drugs subject to price setting will benefit from the cap," Antos said.

Larry Levitt, an executive vice president at Kaiser, tweeted that two political challenges remain for the Democrats — the provisions don't take effect for quite some time, and they'll have to avoid Republican attempts to roll the measures back.

The House is expected to vote on the Senate plan in the coming days. The bill is unlikely to change to ensure its passage. 

For now, Biden has delivered on his promise to allow Medicare to negotiate drug prices. We rate this Promise Kept.

RELATED: No, Senate bill won't strip $300 billion from Medicare

RELATED: Ad targeting Manchin, AARP misses on Medicare drug price negotiations

RELATED: A look at Biden's progress on campaign promises on our Biden Promise Tracker


Our Sources

Senate Democrats, Inflation Reduction Act of 2022, August 2022

PBS, Interview with Kaiser Health News' Julie Rovner, July 29, 2022

Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation, Tweet, Aug. 7, 2022

CNN, What's in the Manchin-Schumer deal on climate, health care and taxes, Aug. 7, 2022

Kaiser Family Foundation, Relatively Few Drugs Account for a Large Share of Medicare Prescription Drug Spending, April 19, 2021

Kaiser Family Foundation, What Are the Prescription Drug Provisions in the Senate Reconciliation Proposal? July 27, 2022

PolitiFact, Seth Moulton correct that prescription drug prices can be negotiated for VA, but not Medicare, June 7, 2019

Email interview, Juliette Cubanski, deputy director, Program on Medicare Policy at Kaiser Family Foundation, Aug. 8, 2022

Email interview, Rachel Sachs, Washington University in St Louis law professor, Aug. 8, 2022

Email interview, Joe Antos, American Enterprise Institute Senior Fellow and Wilson H. Taylor Scholar in Health Care and Retirement Policy, Aug. 8, 2022


Louis Jacobson
By Louis Jacobson December 13, 2021

House approves provision to permit some drug negotiation by Medicare

Democrats are one step closer to a long-sought policy goal: allowing Medicare, the federal health insurance program for Americans over 65, to negotiate prices with drugmakers. 

The idea has been to leverage the government's market power to get better deals on pharmaceuticals and pass along the savings to Medicare beneficiaries, something currently forbidden under the law.

"Biden will repeal the existing law explicitly barring Medicare from negotiating lower prices with drug corporations," Biden said as a candidate.

Biden's social spending and safety net legislation, the Build Back Better bill, passed the House on Nov. 19. After months of negotiation, the version that passed the chamber kept language addressing Medicare price negotiation, although it isn't blanket permission to negotiate on price for all drugs.

The bill would permit price negotiation over a small number of high-cost drugs covered under Medicare Part D, starting in 2025, and Medicare Part B, starting in 2027, according to an analysis by the Kaiser Family Foundation. (Medicare Part D covers prescription drugs, while Medicare Part B covers out-of-hospital patient treatment.)

Under the bill, the number of single-source drugs subject to negotiation would start at 10 in 2025, rise to 15 in 2026 and 2027, and finally reach 20 in 2028 and beyond.

These drugs would be selected from among the 50 drugs with the highest spending in each of the two Medicare categories, and would apply to insulin as well.

Separately, the Build Back Better bill includes other provisions that could reduce Medicare drug costs, including limits on annual drug price increases, a cap on out-of-pocket spending for Medicare Part D beneficiaries; limits on cost sharing for insulin; and an end to cost-sharing for covered adult vaccines.

With House passage of the bill, it moved to the Senate, where Democratic leaders have said they hope to vote on it before Christmas 2021. That timeline could slip, and even if it passes the Senate, it might undergo changes that would need to be approved by the House. 

Given the lengthy, bicameral negotiations that preceded House passage, the bill's ultimate enactment is no certainty. Still, House passage is a major step forward, so we rate this In the Works.

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