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Drug Plan Premiums Would Be Lower If Medicare Negotiated Prices

​Consumers and Medicare would save if Congress accepts Rx bargaining provision

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En español | ​If Congress includes a provision to allow Medicare to negotiate the price of some prescription drugs in the major budget bill it's working on, Part D premiums could decline 15 percent by the end of the decade, according to a new analysis.

A report by the nonpartisan Henry J. Kaiser Family Foundation (KFF) shows that, according to Medicare's actuaries, if the U.S. Department of Health and Human Services were given the authority to negotiate directly with pharmaceutical companies, consumers would save a total of $14 billion in Part D premiums by 2029. This savings "translates into estimated per capita savings for Part D enrollees who pay premiums of $39 annually in 2023, increasing to $85 in 2029," the report says.

The proposals being debated in the House of Representatives and the Senate as part of a sweeping $3.5 trillion budget bill would allow price negotiations for some high-priced brand-name drugs, both under Part D prescription drug plans and for medications administered under Part B in doctors' offices.

"The biggest benefit of negotiation is that it would lower costs in particular for medications with no competition," says Tricia Neuman, senior vice president at KFF and coauthor of the report. When it comes to the pricing for these noncompetitive drugs, she adds, "the government's hands are tied, meaning the government has no ability or leverage to negotiate to bring down prices. And that puts a burden on patients and adds significant costs to the federal government."

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Neuman says that while the KFF report specifically looks at the effects negotiations would have on premiums, if the government could successfully negotiate prices, that would bring down other out-of-pocket costs for all consumers in addition to producing savings for the Medicare program. The Biden administration has endorsed proposals that would apply the lower prescription drug prices resulting from negotiations to all those who buy such medications. The nonpartisan Congressional Budget Office has estimated that allowing Medicare to negotiate prices would save government health plans more than $450 billion over 10 years.

AARP pushes for lower drug prices

"There is no reason why Americans should continue paying the highest prices in the world for prescription drugs," Nancy LeaMond, AARP executive vice president and chief advocacy and engagement officer, said in a Sept. 9 letter to the leadership of the House Ways and Means Committee, which has jurisdiction over Medicare. The letter points out that in addition to supporting the ability of Medicare to negotiate prices, AARP is also urging Congress to cap out-of-pocket costs in Medicare Part D and penalize drug companies that increase drug prices faster than inflation. AARP research has found that in 2020 alone, prescription prices increased at twice the rate of inflation.

A recent AARP survey shows that 87 percent of adults age 50 and older support proposals to allow Medicare to negotiate prices. More than half (58 percent) of those responding to the poll said they are worried they will not be able to afford to pay for their prescriptions over the coming years. AARP has been urging lawmakers to allow Medicare to negotiate lower prescription drug prices and launched a major advertising campaign this summer to urge senators to support the negotiation proposal.

"Americans can’t afford to pay more than three times what people in other countries pay for the same medicine," LeaMond said after the survey was released. "People shouldn’t have to choose between buying medicine and paying for food or rent."

Dena Bunis covers Medicare, health care, health policy and Congress. She also writes the “Medicare Made Easy” column for the AARP Bulletin. An award-winning journalist, Bunis spent decades working for metropolitan daily newspapers, including as Washington bureau chief for the Orange County Register and as a health policy and workplace writer for Newsday.

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