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New Federal Regulations Could Lead to Lower Prescription Drug Prices

One rule would tie prices of some drugs to international prices

spinner image Doctor holding a bag of chemotherapy medicine.
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Medicare would tie what it pays for some medications administered in doctors’ offices to the lowest prices of these drugs in some overseas countries under one of two new regulations the U.S. Department of Health and Human Services (HHS) released on Friday.

HHS also announced a rule that would require manufacturers to give Medicare beneficiaries enrolled in the Part D prescription drug program the rebates that insurers and middlemen — called pharmacy benefit managers — now use to negotiate and keep monthly premiums down. According to the nonpartisan Congressional Budget Office (CBO), this regulation would cause Part D premiums to increase, costing taxpayers $177 billion over 10 years.

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Overseas price rule limited to certain drugs

The international pricing rule, which has been called the “most favored nation” regulation, will affect only about 50 medications that are currently administered in doctors’ offices. These are generally very expensive cancer drugs provided intravenously, such as chemotherapy medicine. These therapies are paid for as part of Medicare Part B, which covers doctor visits and other outpatient services.

This rule, which is scheduled to take effect in January, would provide for a seven-year mandatory nationwide pilot that would peg Medicare's reimbursement to providers for administering these drugs to the lowest price available among a group of other countries whose economies are similar to the U.S. economy. Drug prices are typically much lower in those countries. The regulation would not impact the prices of Part D prescription drugs, which represent the vast majority of Medicare spending on medications.

HHS estimates that this regulation could save Medicare recipients $28 billion over seven years, because the lower prices of these expensive medications would decrease patients’ copays.

Pharmaceutical companies on Friday called this rule “unlawful,” and the industry is expected to file lawsuits to try and stop the regulation from taking effect, which could delay or stop the implementation of the program.

"There is no reason why Americans should continue to pay the highest prescription drug prices in the world,” AARP said on Twitter. “AARP supports efforts to better align drug prices paid under Medicare with prices paid by other developed nations.” AARP, which has called for an overhaul of the way Medicare pays for drugs administered under Part B, is still analyzing the details of the regulation HHS released on Friday.

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Rebate rule would cost consumers more

The rebate regulation, which would take effect on January 1, 2022, would apply to a limited number of prescriptions that currently receive rebates, particularly those that are very expensive and those where there are competing brand-name drugs.

The rule could increase drug manufacturer revenue by more than $150 billion over 10 years, and executives from major pharmaceutical companies testifying at a Senate Finance Committee hearing last year would not commit to lowering their prices if this regulation was enacted.

"All consumers with Part D coverage will likely see their premiums increase, and Medicare spending will also increase,” said Megan O'Reilly, AARP vice president for federal health and family issues. “That's why AARP has urged bipartisan action on solutions that get at the root cause: high prices set by drug companies.” The CBO found that this regulation would not lead to lower prescription drug prices and that prices could continue to increase.

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