A new analysis shows that if Medicare had negotiated the price of 10 of the most expensive Part D drugs in 2021, seniors’ out-of-pocket drug costs would have decreased by 23% from $1,250 to $967.
The Centers for Medicare & Medicaid Services, authorized under the Inflation Reduction Act, has been negotiating with pharmaceutical companies the prices of 10 brand-name drugs with the highest total expenditure. The prices will take effect in 2026, unless ongoing pharma companies win ongoing legal challenges.
CMS is only allowed to consider drugs approved for seven years for small-molecule drugs and 11 years for biologics.
Data consultant firm Mathematica simulated this process to estimate drug prices and out-of-pocket spending on what the 10 highest expenditure drugs would’ve been in 2021, the most recent year Part D data is available. At that time, the 10 drugs included Januvia, Novolog, Levemir, Humalog, Enbrel, Victoza and Invega Sustenna, equating to nearly $21 million in total spending and 12.56% of overall Part D spending.
“The list of selected drugs announced by the U.S. Department of Health and Human Services on Sept. 1, 2023, includes only three that made our 2021 list—Januvia, Novolog, and Enbrel—suggesting the set of drugs with the highest expenditures can change markedly from year to year,” the report said.
The analysis estimated that all 10 drugs would have resulted in a price reduction of more than 50% or more once ceiling prices were applied. And while out-of-pocket spending decreased by nearly one-quarter among all demographics, Asian and Pacific Islanders would have experienced the largest percentage decrease. American Indiana and Alaska natives would see a $523 dollar decrease per enrollee, the largest figure for any population.
“We estimate that drug price negotiation will lead to sizable reductions in Part D enrollees’ out-of-pocket spending for all groups considered, with some groups benefiting significantly more than others,” the study concluded.
Other IRA provisions require manufacturers to pay rebates to Medicare when drug prices are raised faster than inflation and establishing a cap on out-of-pocket spending set at $2,000. The analysis of 2021 drugs showed that had a cap been implemented then, average Part D out-of-pocket spending on all Part D drugs would have declined by 33%.
Medicare Part D covers more than 50 million beneficiaries, but brand-name prescription drugs have risen more than 10% per year from 2009 to 2018, according to the Congressional Budget Office.