How the Inflation Reduction Act aims to lower drug costs

48 million Americans get prescription drugs through Medicare Part D, but Medicare has had no ability to negotiate prices. A provision in the Inflation Reduction Act would change that in some cases. The bill would also cap out-of-pocket drug costs for Medicare recipients. Stacy Dusetzina from the Vanderbilt University School of Medicine joins Lisa Desjardins to discuss.

Read the Full Transcript

  • Lisa Desjardins:

    Now to another major piece of this bill, healthcare. As part of the package, Democrats are within reach of a longtime goal, allowing Medicare for the first time to negotiate drug prices that would start in 2026. 48 million Americans get prescription drugs through Medicare Part D, nearly a third of all prescription spending in 2017.

    But Medicare has had no ability to negotiate prices. This bill would change that for some drugs. The bill would also cap out of pocket drug costs for those on Medicare. And it increases health for low income families with new subsidies and extends Affordable Care Act subsidies for the next three years.

    Stacie Dusetzina, Associate Professor of Health Policy at the Vanderbilt University School of Medicine joins me now to discuss what all this means. Stacie, let me just ask you the big question. How significant is this in healthcare?

    Stacie Dusetzina, Vanderbilt University School of Medicine: This is a really big step forward in the Medicare program in particular. So I would say huge.

  • Lisa Desjardins:

    Let's talk about specifically then. So the drug market and Medicare's ability to now negotiate some prices, some. Is this too limited to really affect the overall drug market? And then also, what do we expect manufacturers to do? Could they raise prices for everyone else?

  • Stacie Dusetzina:

    Very good questions. So this is a modest start. But I think you have to put it in context of the fact that when the Medicare Part D program was first devised, they were banned explicitly from negotiating for drug prices. So this is a huge step towards bringing drug price negotiation into the program for the first time. It is a modest start.

    But part of that is to recognize the fact that we have limited information and research to understand the effects on innovation. So this is a way to give us experience with drug price negotiation, and to understand the balance that that takes when it comes to investment in the industry and development of new drugs. So for new drugs coming onto the market, they would have the ability to increase their prices.

    But for existing drugs, the bill also includes limits on price increases to the rate of inflation. And that, again, is a new policy for Medicare. It's something that we've had in the Medicaid program, and has really resulted in a lot of savings for that program. So this would be a risk for brand new drugs, but not necessarily for any drugs that currently are on the market.

  • Lisa Desjardins:

    One of the items a lot of folks were following was what would happen with insulin drug prices. In particular, we've seen such high spikes in insulin prices in the last decade. This bill originally was going to cap those out of pocket costs $35 for a month's supply of insulin, that's out of the bill, in large part because of budget rules didn't allow it to happen. What do you make of that the fact that now insulin prices really, at least for now, will not be changed by this?

  • Stacie Dusetzina:

    So I think there is an important distinction between the price that we pay manufacturers for insulin and the copay that people pay when they fill their drugs under their health plans. And the version of the bill that was they attempted to pass today included a copay cap for people on Medicare and in the commercial market. It did not include price negotiation for insulin, which would potentially reduce the cost of insulin for everyone, including uninsured people.

    So I think that, you know, it's very disappointing for those who were really hoping to see additional progress on insulin coverage, that it came out of the bill. But at the same time, I think that more needs to be done around the price that we pay for insulin and how people who don't have insurance access insulin. So I think that it may be best tackled in additional legislation and hopefully bipartisan legislation, given how important the topic is to so many Americans.

  • Lisa Desjardins:

    I'm so glad you said that, just to clarify, folks on Medicare will see that $35 limit for insulin. It's just the millions of people who are not on Medicare, who will not have that, and I think you're right. My reporting is that the Senate probably will try and come back to this, maybe in the fall. Want to talk to you about low income Americans what's in this bill for them?

  • Stacie Dusetzina:

    So there isn't a new provision for people who have low incomes in the Medicare program. So these are people who qualify for an extra help on the Medicare Part D benefit. They are between 135 and 150 percent of the Federal Poverty Level in their income and they tend to have low assets.

    So the bill would actually provide much more generous coverage for those individuals in the Medicare program, which is a really big step forward. It's a group of patients that we know have typically had a very hard time affording their drugs based on how the benefit was designed, up to now.

  • Lisa Desjardins:

    Stacie, what else have I missed that's important?

  • Stacie Dusetzina:

    So the thing I'm most excited about is the cap of on out-of-pocket costs for Medicare beneficiaries, it would put a $2,000 hard limit on the Medicare Part D benefit. And this would have huge implications for people needing expensive drugs like those used for treating cancer and other complex illnesses. This is a major, major improvement over today's benefit, and I'm very happy to have seen it as part of this bill.

  • Lisa Desjardins:

    Stacie Dusetzina of Vanderbilt School of Medicine. Thank you so much.

  • Stacie Dusetzina:

    Thank you.

Listen to this Segment