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What Medicare could do to get you lower drug prices

Editor’s Note: Journalist Philip Moeller is here to provide the Medicare answers you need in “Ask Phil, the Medicare Maven.” Send your questions to Phil.

Moeller is a research fellow at the Center on Aging & Work at Boston College and co-author of “How to Live to 100.” He wrote his latest book, “Get What’s Yours — The Secrets to Maxing Out Your Social Security,” with Making Sen$e’s Paul Solman and Larry Kotlikoff. Follow Moeller on Twitter @PhilMoeller or email him at

Medicare has zillions of rules but there is one more I actually would like to see: the right to negotiate with drug companies over pricing. Providing the agency with this single new tool might, by itself, reduce spending on senior health care enough to quiet concerns that the health care costs of rising numbers of older Americans will bankrupt Medicare and Medicaid.

Likewise, the U.S. Food and Drug Administration has no oversight over drug prices, a spokeswoman says. Occasionally the Federal Trade Commission and Justice Department get involved with anti-competitive business practices that conceivably could have an impact on prices.

In the real world where Medicare beneficiaries live, prescription drug prices pretty much go unchecked. Medicare spent $4.5 billion last year on three new hepatitis C liver-disease treatments — $3 billion for Sovaldi, $820 million for Olysio and $670 million for Harvoni. Total hepatitis C spending, including older meds, was $4.7 billion, or a mere 16.5 times its 2013 spending on such medications. These new drugs are improved lifesavers, to be sure. But at what cost?

It has been amply and sadly proven that when drug prices increase, millions of older Americans economize by taking fewer drugs or skipping needed medications altogether. The FDA may be overseeing drug safety, but no one seems to be minding the story when it comes to the health effects of higher drug prices. Perhaps the FDA should tell us how its regulatory decisions affect drug supplies and prices.

Total spending on prescription drugs rose 13 percent last year, according to Express Scripts Holding Company, a large drug benefits manager. That was the largest one-year increase in a decade and was driven by a 31-percent increase in spending on specialty drugs such as Sovaldi. Within just Medicare, special-drug spending was up nearly 46 percent.

Here are two lists of the traditional and specialty drugs on which Medicare health plans spent the most money last year, according to the company’s recently released 2014 Drug Trends Report.

Traditional Drugs

  1. Lantus® (insulin glargine injection), diabetes
  2. Nexium® (esomeprazole magnesium), heartburn/ulcer disease
  3. Crestor® (rosuvastatin), high blood cholesterol
  4. Abilify® (aripiprazole), mental/neurological disorders
  5. Advair Diskus® (fluticasone/salmeterol), asthma
  6. Spiriva® (tiotropium), COPD
  7. Namenda XR® (memantine extended release) mental/neurological disorders
  8. Januvia® (sitagliptin), diabetes
  9. duloxetine, depression
  10. Levemir® (insulin detemir injection), diabetes

Specialty Drugs

  1. Sovaldi® (sofosbuvir), hepatitis C
  2. Revlimid® (lenalidomide), oncology
  3. Copaxone® (glatiramer), multiple sclerosis
  4. Enbrel® (etanercept), inflammatory conditions
  5. Humira® (adalimumab), inflammatory conditions
  6. Gleevec® (imatinib), oncology
  7. Zytiga® (abiraterone), oncology
  8. Olysio® (simeprevir), hepatitis C
  9. Harvoni® (ledipasvir/sofosbuvir), hepatitis C
  10. Avonex® (interferon beta 1-a), multiple sclerosis

While generic drugs remain a relative bargain, shocking price hikes have hit even this sector. They occasioned a Congressional hearing last October but nothing came of it. Fifteen makers of generic drugs were invited to share their views and somehow all of them found better ways to spend their time.

Giving Medicare the right to negotiate the prices it pays for prescription drugs would hardly make this problem go away. If you think the flap over Obamacare’s non-existent death panels is intense, imagine what would happen if Medicare refused to pay the going rate for Sovaldi or another new drug that can save lives.

But Medicare has tremendous pricing leverage where it does have regulatory oversight. In the absence of such authority, private insurers are beefing up their own drug benefit networks to create as much leverage as they can over pharmaceutical companies. Just this week, for example, UnitedHealthcare’s said it would spend nearly $13 billion to buy Catamaran, a pharmacy benefits manager.

We’ll see whether this lowers drug prices or simply shifts pharmaceutical profits into insurance company pockets. What remains true is that Medicare beneficiaries are pawns here.

Consumers are partially shielded from catastrophic costs by Medicare’s “donut hole” protection. But this “protection” actually helps boost pharmaceutical revenues. Consumers are financially able to continue to demand drugs that Medicare ultimately pays a big chunk of. They do so in large part because Big Pharma spends enormous amounts of money on consumer advertising to perpetuate the demand cycle that helps it flourish.

Your Medicare Questions

Medicare rules and private insurance plans can affect people differently depending on where they live. To make sure the answers here are as accurate as possible, Phil is working with the State Health Insurance Assistance Program (SHIP). It is funded by the government but is otherwise independent and trains volunteers to provide consumer Medicare counseling in state and local offices around the country. The non-profit Medicare Rights Center is also providing on-going help.


Ask the Medicare Maven

Coral – Mich: I lost my job in July. I had a job for a month in January 2015, so I am on the Michigan Health Care plan. I had to sell my home, and I’m going to live with a friend that I’ve known for 36 years, so I won’t be homeless. I am filing for disability because I am bipolar, have spinal, nerve and back problems. I am only getting $15,000 for my home, and I have a lot of bills I have to pay off. I still need my Medicare. Is there any way I can keep it?

Phil Moeller: I’m so sorry you’re having such a tough time. I’m not sure why you’re worried about keeping Medicare, or whether your entitlement to it is because you’re 65 or older or because of a disability. Whatever the reason, it seems to me that you not only should be able to keep Medicare but that you may not even have to pay much for it.

Depending on Michigan Medicaid income guidelines, you may be eligible for state financial assistance to pay for your Part B premium and maybe even your Medicare coinsurance and deductibles. There are several Medicare Savings Programs that might provide help, as well as a federal Medicare benefit called Extra Help that can help with drug plan premiums and copays. I’d begin by calling the Michigan SHIP office at (800) 803-7174. Ask them to explain your options, and expect them to ask you questions about your financial resources and disability status. Best of luck.

Ria – N.J.: I will be retiring on May 28. How can I be sure that my plan B and Medicare Advantage Plan will be in effect for June 1?

Phil Moeller: You already are eligible to enroll in Medicare. To be safe, you should enroll in April so that your coverage will be effective May 1. If your employer coverage ends May 28 when you retire, you don’t want even a three-day window of being without insurance. The Medicare Rights Center has a useful “how-to” explanation to help guide you. Social Security handles Medicare enrollments.


Thanks, but no thanks, Medicare, for the love

If you are not yet receiving Social Security benefits and do not wish to begin now, make sure you sign up only for Medicare and don’t accidentally sign up for Social Security as well. Here’s the information on how to sign up only for Medicare. Also, you should take a close look at Medicare Advantage Plans available where you live. Use Medicare’s Plan Finder to get details on these plans, including entering your prescription drug information. Rather than just picking the plan with the lowest monthly premium, look at the full costs of the plan. Plan Finder will use your prescription drugs and project annual costs that include premiums, co-pays and deductibles.