Medicare drug price negotiations could save government billions

Read the Full Transcript

• Amna Nawaz:

  President Biden today announced the first batch of drugs designated for Medicare price negotiations, a goal of Democrats and supported by much of the American public for decades.

  The 10 medications selected today are among those that cost Medicare the most money and could save the government billions of dollars, but drug manufacturers are attempting to block the effort.

  Stephanie Sy has the details.

• Stephanie Sy:

  These price negotiations are part of a program established by the Inflation Reduction Act last year, with the goal of making popular drugs more affordable to older and disabled Americans.

  It gives the government, through Medicare, the authority to negotiate lower prices with pharmaceutical companies for select medications. Today, the Biden administration listed the first 10 drugs up for negotiation.

  Popular blood thinners like Eliquis and Xarelto are on the, list as well as diabetes medications like Jardiance. Last year, just these 10 drugs cost Medicare recipients $3.4 billion out of pocket and cost the Medicare program $50 billion.

  President Biden celebrated the milestone at the White House today.

  Joe Biden, President of the United States: Today is the start of a new deal for patients, where big pharma doesn't just get a blank check at your expense and the expense of the American people. On my watch, health care should be a right, not a privilege, in this country.

• Stephanie Sy:

  Pharmaceutical companies, which have mounted legal challenges to the law, have to negotiate or face heavy tax penalties. The new prices will only take effect in 2026.

  Stacie Dusetzina has been watching all of this closely. She's a professor of health policy and cancer research at Vanderbilt University School of Medicine.

  Stacie, explain why this announcement is such a big deal. And how will it impact people that take those specific 10 medications?

• Stacie Dusetzina, Vanderbilt University:

  So, it's a really big deal, because when Medicare Part D was first enacted, Medicare was banned from negotiating drug prices directly.

  So this is the first time that the program has been able to negotiate for individual drug prices across all Medicare beneficiaries. So, it is really a historic step. Now, for people who take these drugs that are on the list, some of them will actually see direct benefits in their prices going down by the time the new prices are implemented in 2026.

  That includes anybody who's paying a deductible or paying a coinsurance, a percentage of the drug's price. So, for — especially for many of the drugs on the list that are somewhat lower prices, they're chronic disease medications that are filled every month, patients may actually see their prices go down directly.

  But many people will see their prices go down indirectly, because they will get the benefits of having Medicare redesigned, and have the new $2,000 out-of-pocket cap as part of their benefit. And that will go into effect in 2025.

  So the good news for Medicare beneficiaries and people who know Medicare beneficiaries is, those changes are coming even earlier than the negotiated prices. But the negotiation is being used in part to pay for that expansion of benefits, so that premiums don't have to go up to compensate.

• Stephanie Sy:

  What about the fact that there were several lawsuits pending to block the implementation of the law?

• Stacie Dusetzina:

  Yes, I mean, that's a real concern is that, if the lawsuits were successful, and the negotiations were stopped, that would be a large amount of savings that are expected to help pay for expanding the benefit that would no longer be there.

  So I think one of the concerns, if we lost drug price negotiation, is that premiums would then have to rise to compensate for this improvement in benefits. And I think that has real implications for people who may already struggle to pay premiums to have health insurance coverage today.

• Stephanie Sy:

  That would be a serious side effect, if that were to be the case.

  The pharmaceutical companies that make these drugs claim that forcing them to lower prices will mean less money they can put toward the research and the development of new needed treatments. In fact, one industry group said today that Biden's Moonshot for finding a cure for cancer is in jeopardy because of this policy.

  What's your view on that being a side effect of this?

• Stacie Dusetzina:

  So I think it is important to recognize that we ask for a lot from the pharmaceutical industry. And there's a lot of investment into the pharmaceutical industry that really is there because of the high returns that they are able to bring.

  That said, the law only is focusing on older drugs and drugs that have really been blockbusters in the Medicare program. So the companies that have made these products have really reaped handsome profits from those drugs for many years, before they're even eligible for negotiation.

  So I think, when we consider the real question of trade-offs and effects on innovation, this is a good way for us to get real experience with understanding how lower prices affect innovation in a way that has some important guardrails on the process.

• Stephanie Sy:

  There's clearly a lot that still has to be worked out.

  Is just the fact that the federal government may begin negotiating directly with pharmaceutical companies for drug prices, is that leading to shifts that could affect Americans concerned about these prices more broadly?

• Stacie Dusetzina:

  Well, I think there could be some additional effects on people outside of Medicare.

  But, by and large, we expect most of these changes to be for Medicare beneficiaries. I will say that it is important to recognize that, as taxpayers, we all contribute to the Medicare program, so savings to Medicare are actually savings to both the people benefiting from the program right now and those of us paying taxes that are helping to support the program.

• Stephanie Sy:

  Stacie Dusetzina at Vanderbilt University, thank you so much.

  And if you want more information about the 10 drugs selected today, you can find a detailed list and more on our site at PBS.org/NewsHour.