AARP Hearing Center
Millions of Older Americans are Already Benefitting from AARP-Supported Drug Law
As we take time to acknowledge the contributions of past and current older persons during Older Americans Month, a new law passed in 2022 is lowering the prices of prescription drugs and creating significant savings for people with Medicare. Millions of older Americans are already benefitting from the new drug law, which requires Medicare to start negotiating the price of certain drugs, penalizes drug companies that increase their prices faster than inflation, caps seniors' annual out-of-pocket costs for prescription drugs in Medicare Part D, limits cost-sharing for insulin in Medicare drug plans and extends financial assistance to help people with limited resources afford health insurance.
The new law represents a fundamental shift in how the US approaches prescription drug pricing in Medicare and finally starts to hold drug companies accountable for their out-of-control prices. Here's a quick rundown of the new benefits and protections that are already available and what’s still to come.
More Ways to Benefit
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Benefits that are available right now
Insulin co-pays capped at $35/month. Co-pays for a 30-day supply of any plan-covered insulin are now capped in Medicare Part D, with similar limits on out-of-pocket costs for insulin covered under Medicare Part B. Part D plans are required to offer this co-pay amount even before you meet your deductible for the year. Prior to the new drug law, the average out-of-pocket cost for people with Medicare was more than $60 per insulin fill. It’s estimated that 1.5 million Medicare beneficiaries would have saved an average of $500 each if this new protection had been in place in 2020.
Free vaccines for Medicare beneficiaries. If you’re on Medicare, you no longer have to pay anything out-of-pocket for vaccines that are recommended for adults by the Advisory Committee on Immunization Practices (ACIP). This was an important change for Medicare Part D-covered vaccines that previously required cost-sharing, such as shingles. Overall, 10.3 million enrollees received a Medicare Part D-covered vaccine with no cost sharing in 2023, representing about 20 percent of the total Part D population.
No cost sharing for catastrophic coverage in Part D. Under the original Part D benefit, once your out-of-pocket costs reached a certain threshold, you entered “catastrophic” coverage but were still responsible for 5% of your prescription drug costs, with no limit. In 2022, 1.5 million people in Medicare Part D prescription drug plans reached catastrophic coverage and had to continue paying 5% of their drug costs for the rest of the year, which sometimes meant paying thousands of dollars more. Now, people in Part D plans are not responsible for any out-of-pocket drug costs once they enter catastrophic coverage. This change is the first step of even bigger changes discussed below that will further limit annual out-of-pocket costs starting in 2025.
Expanded eligibility for Medicare Part D Extra Help. Medicare pays some or all of the out-of-pocket prescription drug costs for people with limited incomes and resources through the Extra Help program. This year, the income threshold for the full Extra Help benefit increased from 135 percent to 150 percent of the federal poverty level ($22,590 for a single person or $30,660 for a couple in 2024). This change improved access to affordable prescription drug coverage for nearly 300,000 individuals with Medicare, as well as an additional 3 million people who could benefit from Extra Help but aren’t currently enrolled.
Drug companies pay penalties for big price increases. Drug companies that increase the prices of their products faster than inflation must now pay the higher-than-inflation amount back to Medicare. For example, if inflation were 5%, and a drug price increased by 6%, the drug company has to pay the 1% difference for all Medicare-based sales of that drug back to Medicare. This provision addresses brand name drug companies' long-standing practice of increasing their prices year after year, often at rates that are higher than inflation.
The nonpartisan Congressional Budget Office (CBO) expects the new penalties to reduce drug prices for Medicare and the commercial health care market, which will lead to lower premiums and out-of-pocket costs for millions of Americans.
Medicare drug price negotiation process begins. The Department of Health and Human Services has launched a new annual process to identify the drugs Medicare spends the most money on and choose a subset of drugs for price negotiation. All of the selected drugs must be single source, meaning there is no generic or biosimilar competitor on the market, and the newest drugs on the market will not be eligible for negotiation. Drugs will only be eligible for the two-year negotiation process if it has been at least 7 years (for small molecule drugs) or 11 years (for biologic drugs) since they were approved by the US Food & Drug Administration (FDA).
Federal officials have already announced the first 10 drugs selected for Medicare drug price negotiation:
