Starting next month, some Medicare beneficiaries will pay less out of pocket for 27 prescription drugs whose prices rose faster than inflation late last year, the Department of Health and Human Services said Wednesday.
The announcement comes as President Joe Biden once again highlights his efforts to lower Americans’ everyday costs amid higher-than-desired inflation.
Seniors could see their cost sharing drop by between $2 and $390 per average dose for the medications, which are used by patients with several types of cancer, fungal infections, acne, rheumatoid arthritis, chronic kidney disease and urinary tract infections, among other conditions. The drugs, which are covered by Medicare Part B, are administered by doctors.
The list of drugs eligible for rebates would be updated quarterly, said HHS Secretary Xavier Becerra.
Just how much Medicare beneficiaries will save depends on a variety of factors, including whether they have supplemental coverage and what their treatment protocol is. Seniors typically pay 20% of the Medicare-approved cost of the drug as co-insurance.
The cost savings stem from a provision of the Inflation Reduction Act, which congressional Democrats passed last August. It requires drug companies pay a rebate to Medicare if they raise their prices faster than inflation.
The measure also serves as a “strong incentive” to dissuade drug makers from hiking prices, said Chiquita Brooks-LaSure, administrator of the Centers for Medicare and Medicaid Services. In 2021, the prices of some 1,200 prescription drugs increased faster than inflation, according to a recent HHS report.
“It’s sort of, I would say, a two-fold benefit – one, that if drug companies do exceed inflation, they will be paying rebates to the federal government,” she said Tuesday. “But even as important, I would say, is the incentive for drug companies not to increase costs, and that’s something we’ve seen in the Medicaid inflation rebate, and now this is a an even stronger tool.”
Some 3.4 million Medicare beneficiaries would have saved $234 million in out-of-pocket costs – or an average of $70 per person – on vaccines in 2021 had another Inflation Reduction Act provision been in effect at that time, according to a new HHS report. The law makes recommended Part D vaccines, including those for shingles and tetanus, free for seniors, as of January.
The agency expects even more seniors to benefit this year from the measure.
In addition, CMS is expected to release initial guidance on its drug price negotiation process, which will outline how the agency will select drugs and how the negotiations will be conducted.
The Inflation Reduction Act empowered Medicare to negotiate the prices of certain costly medications administered in doctors’ offices or purchased at the pharmacy for the first time.
The HHS secretary can negotiate the prices of 10 drugs for 2026, and another 15 drugs for 2027 and again for 2028. The number rises to 20 drugs a year for 2029 and beyond. Only medications that have been on the market for several years without competition are eligible.
The agency’s announcements come the day after Novo Nordisk became the latest drug maker to announce it would slash the list prices of several of its insulin products.
The Inflation Reduction Act reduces Medicare beneficiaries’ out-of-pocket cost for insulin to $35 per month per prescription starting this year. But Republicans blocked a measure to extend that price cap to those covered by private insurance.
Biden and congressional Democrats have been pressuring insulin manufacturers to lower their prices, which would benefit patients with diabetes who aren’t eligible for Medicare.
Earlier this month, Eli Lilly announced a series of price cuts that would lower the price of the most commonly used forms of its insulin by 70%. Eli Lilly also said it will automatically cap out-of-pocket insulin costs at $35 for people who have private insurance and use participating pharmacies, as well as expand its Insulin Value Program, which caps out-of-pocket costs at $35 or less per month for people who are uninsured.