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Americans pay a lot more than people in other countries for prescription drugs. It’s driving voters insane, and while lawmakers have promised for decades to do something about it, they haven’t made much progress.
That could change this week. The Inflation Reduction Act – hashed by Senate Majority Leader Chuck Schumer, DN.Y., and Sen. Joe Manchin, DW.V. – contains several provisions on drug prices and health insurance. The Senate plans to put the bill to a vote Saturday, and it appears on track to pass Congress and be signed into law by President Biden.
It’s all music to the ears of patients who have been burdened with high-priced drugs for years.
“The expense cap proposal that’s on the table now would absolutely make a huge difference in my life,” said Medicare beneficiary Bob Parant, 69, of Westbury, New York. He has type 1 diabetes and pays about $5,000 out of pocket each year for insulin, in addition to thousands more for a heart drug.
Here are details on this and other proposals 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 could directly negotiate the prices of certain expensive drugs for Medicare each year. This starts in 2026 with 10 drugs and increases to 20 drugs by 2029. In order to be negotiable, the drugs would have to be on the market for several years.
Then there’s the proposal that Parant is most excited about: People on Medicare wouldn’t have to pay more than $2,000 a year in out-of-pocket payments for prescription drugs, which is a big one for seniors with certain medical conditions like cancer and multiples sclerosis will make difference. It should start in 2025.
And if drug companies increase the price of their drugs faster than inflation starting next year, they’ll have to pay Medicare a rebate. That could affect many drugs – according to an analysis by the Kaiser Family Foundation; In 2019-20, the price of half of all Medicare-covered prescriptions rose faster than inflation. This provision could help deter drug companies from constantly raising prices.
Do experts think it will make a difference?
In fact, many health policymakers consider these changes to be significant.
“This is a major breakthrough,” said Tricia Neuman, who leads the Program on Medicare Policy at KFF. “Congress has been talking about doing something about drug prices for decades. [This] maybe not everything everyone wants, but it really is a big cause and it will provide significant help to literally millions of people who need it.”
“It’s a huge thing,” agrees Stacie Dusetzina, a professor of health policy at Vanderbilt University. “It really breaks a lot of new ground and fixes a lot of problems.”
The Congressional Budget Office, which analyzed an earlier version of the bill, estimates these changes will save the government $288 billion by 2031.
Why does it take so long for many of these things to work?
For someone who’s into Medicare and spends $10,000 a year on cancer care, like Neuman’s friend, the timing of those changes might be hard to stomach.
“Of course, next year she’s going to be like, ‘Why am I still paying so much money?'” Neuman says. “Some things just can’t happen fast enough just because it takes a while to get going.” Enabling these regulations will require a lot of work from federal health authorities and industry associations.
Neuman says she understands that people are concerned about relief, but once provisions like Medicare’s out-of-pocket cap come into effect, “this is going to be a really big deal for people who are on expensive medications and for others who are on their medication.” have seen prices go up every year.”
I’ve heard the law will result in fewer new drugs. Is that true?
This is an argument used by drugmakers to get people to resist these changes. In 2022, the pharmaceutical and healthcare products industry spent more lobbying in Congress than any other industry, according to the nonprofit organization Open Secrets. It is fighting hard to keep these changes from becoming law because it would hurt its profits.
For example, PhRMA, the Pharmaceutical Research and Manufacturers of America, claims in an advertising campaign that the drug pricing provisions in the bill could reduce the number of new drugs coming to market by “dissuading research and development.” The trade association also alerted NPR to this industry-funded analysis by Avalere, which estimates the bill could cut drugmakers’ revenues by $450 billion by 2032.
However, an analysis by the Congressional Budget Office estimates that the impact on drug development would be modest. About 15 out of 1,300 drugs would not reach the market in the next 30 years – that corresponds to about 1% of new drugs. Also, most big pharmaceutical companies spend more on marketing than on research and development.
Some ads claim Medicare will be cut. Is that true?
These ads are misleading. For example, a project called Commitment to Seniors launched a seven-figure advertising campaign claiming that the Senate bill would “take nearly $300 billion out of Medicare.” In fact, the government is expected to save that amount of money because Medicare doesn’t have to pay as much for expensive drugs, it’s not money that’s taken out of Medicare’s budget. It is therefore important that the benefits of the elderly are not reduced.
“When people see an ad on TV for a group called Commitment to Seniors, it sounds pretty harmless,” says Michael Beckel of Issue One, who follows dark money. It turns out that Commitment to Seniors is a project by another group, American Commitment, which has given PhRMA more than $1 million, including $325,000 in 2020.
According to Beckel, it’s not uncommon for the industry to engage in such tactics. “The pharmaceutical industry is a major lobbying force and a key player in dark money.”
What about insulin? Would people with diabetes be helped at these prices?
Insulin is often the poster boy when it comes to runaway prices and life-or-death stakes. US insulin prices are, on average, four times higher than other countries after rebates, and about 1 in 4 diabetic patients have reported taking less insulin than prescribed because they cannot afford it. As of this writing, it’s unclear whether any of the proposed reforms to insulin pricing — or at least patient co-payments — will make it into the final bill.
A provision to limit co-payments to $35 per month for insureds taking insulin is mutually supported, but may not be included in the final bill.
What else is in the Health Act?
The other big thing in the bill is protecting consumers from a potentially catastrophic change that would happen without new legislation.
Individuals who purchase insurance on Affordable Care Act marketplaces — such as Healthcare.gov and the state marketplaces — can receive generous premium subsidies for three additional years. After these additional subsidies went into effect with the passage of the American Rescue Plan, the government estimated that 4 out of 5 enrollers qualified for a plan with a premium of $10 or less per month.
Krutika Amin, who works with Neuman at KFF, says it’s important that lawmakers enshrine this extension now, as 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 the additional subsidies before the August recess, it will help bring reassurance to both insurance companies and the state and federal agencies that are running [the marketplaces] to be able to implement it in a way that’s seamless for consumers,” she says.
The additional discounts on plans made a difference. Last year, 14.5 million people — more than ever before — purchased insurance on Healthcare.gov, and an early analysis by HHS suggests the total number of people who were uninsured in the US was in the first months of this year reached a record low.
NPR Pharmaceuticals correspondent Sydney Lupkin contributed to the coverage.