Searching for savings in Medicare drug price negotiations
- Collection:
- Health Policy and Services Research
- Series Title(s):
- Issue brief (Henry J. Kaiser Family Foundation)
- Author(s):
- Cubanski, Juliette, author Neuman, Tricia, author
- Contributor(s):
- Henry J. Kaiser Family Foundation, issuing body.
- Publication:
- San Francisco, CA : Henry J. Kaiser Family Foundation, April 2018
- Language(s):
- English
- Format:
- Text
- Subject(s):
- Drug Costs Medicare Part D -- economics Negotiating Prescription Drugs -- economics Cost Savings Humans United States
- Genre(s):
- Technical Report
- Abstract:
- Prescription drug costs continue to raise fiscal concerns for public and private payers and affordability worries for consumers. Nationally, drug spending spiked in 2014, mainly due to new and costly breakthrough treatments for hepatitis C that came to market starting at the end of 2013, along with fewer opportunities to control spending through greater use of generic drugs. For Medicare, which accounted for 29 percent of national retail pharmaceutical spending in 20161, average per capita costs in the Part D prescription drug program have been rising, and are projected to grow more rapidly over the next decade. Medicare Part D average per capita costs increased from 2.4 percent between 2007 and 2013 (the year before new hepatitis C treatments became widely available) to 4.4 percent between 2013 and 2016, and are projected to increase annually by 4.7 percent between 2016 and 2026.2 This increase will affect both federal spending and beneficiaries' out-of-pocket costs for prescription drugs. In response to higher drug spending growth and heightened attention to drug prices, some policymakers and experts have proposed allowing Medicare to negotiate the price of prescription drugs. Under current law, the Secretary of the Department of Health and Human Services (HHS) is explicitly prohibited from negotiating directly with drug manufacturers on behalf of Medicare Part D enrollees. Allowing the federal government to negotiate drug prices for Medicare beneficiaries is supported by 92 percent of the public, including a majority of Democrats (96%), Republicans (92%), and Independents (92%) (Figure 1). This proposal was also endorsed in a recent report from the National Academies of Sciences, Engineering, and Medicine. President Trump has said he will “bring down drug prices” and has repeatedly criticized the current-law policy that prohibits the government from negotiating with pharmaceutical companies in an effort to lower drug prices in Part D and achieve federal savings.3 He has also said “we don't bid properly and we're going to start bidding.” To date, Republican Congressional leaders have not outlined specific proposals to reduce drug costs. Speaker Ryan's A Better Way proposal and recent budget proposals put forward by House Republicans propose changes to Medicare, but do not directly address the issue of Medicare drug spending or prescription drug prices. Proponents believe that giving the HHS Secretary the authority to negotiate drug prices on behalf of millions of Medicare beneficiaries would provide the leverage needed to lower drug costs, particularly for high-priced drugs for which there is no competition and where private plans may be less able to negotiate lower prices. Opponents believe the Secretary would not be able to get a better deal than private plans already do. They also express concern that price negotiations would limit the ability of pharmaceutical companies to invest in pharmaceutical research and development. This issue brief provides a short history of the concept of allowing Medicare to negotiate drug prices, describes various approaches, and assessments of their potential savings from the Congressional Budget Office (CBO), and considers the prospects for action in the future.
- Copyright:
- Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY license. (More information)
- Extent:
- 1 online resource (1 PDF file (5 pages))
- Illustrations:
- Illustrations
- NLM Unique ID:
- 101740253 (See catalog record)
- Permanent Link:
- http://resource.nlm.nih.gov/101740253