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PhRMA, White House Spar Over Medicare Price Negotiation Messaging

Executive Summary

A PhRMA study takes a narrow view of the beneficiary savings that Part D reforms in the Inflation Reduction Act could produce, sparking the Biden Administration to question its conclusions and the industry's motives.

A Pharmaceutical Research and Manufacturers of America-funded study suggesting Medicare Part D beneficiary cost sharing could actually increase when negotiated prices are implemented in 2026 drew fire from the White House as industry continues its campaign against government price negotiation in the program. 

Key Takeaways

  • A Milliman study found that 3.5 million Medicare Part D beneficiaries could see an average 12% higher cost sharing for drugs that undergo the price negotiation process in 2026 compared to the previous year.

  • The study supports the narrative that Medicare negotiation could lead to negative outcomes for beneficiaries and will compete with Biden Administration efforts tout its policies intended to lower drug prices.

  • However, the study's narrow focus does not present a complete picture by focusing on the impact of negotiation without considering other Part D changes that will reduce beneficiary costs, drug pricing policy expert Stacie Dusetzina said.

The study projects that 3.5 million of an estimated eight million Part D beneficiaries taking one of the negotiated drugs will face 12% higher average costs or $70 annually.

Annual costs for beneficiaries not eligible for the Part D low-income subsidy will increase 11% on average, $104. The annual cost for beneficiaries who qualify for the low-income subsidy will increase an average of 27%, $11, the study found.

The study supports the narrative that the Medicare price negotiation program could increase costs for beneficiaries.

It “is further evidence the [Inflation Reduction Act’s] new drug pricing scheme will have significant unintended consequences for millions of Medicare Part D patients,” PhRMA President and CEO Stephen Ubl said in a statement on the study. “Some people will be shocked when they see their out-of-pocket costs go up as a result of this law, which is the exact opposite of what many policymakers claimed would happen.” 

The study's release followed the recent presentation of an analysis by Adam Fein of the Drug Channels Institute that predicted the negotiation program and the Part D redesign could lead to increased beneficiary costs.  (Also see "Medicare-Negotiated Drugs May Not Get Favorable Coverage In Part D: Will CMS Intervene?" - Pink Sheet, 16 Apr, 2024.)

Similar analyses likely will continue surfacing as the implementation of the Part D reforms next year approach and the impact of the intersecting policies becomes clearer. They also could complicate efforts by the Biden Administration to establish the success of its drug pricing reforms in the minds of voters.  (Also see "Biden vs Trump On Drug Pricing And Unfinished Business" - Pink Sheet, 27 Mar, 2024.) 

“Something I’ve tried repeatedly to impress on people [is that] having your drug selected for negotiation is not necessarily going to be a windfall or a major penalty.” – Vanderbilt’s Stacie Dusetzina

The White House questioned the study's conclusions, adding its usual talking points about overcoming pharma industry opposition to implement the negotiation program. 

“Despite Pharma spending an unprecedented $372m lobbying against his Inflation Reduction Act, President Biden beat them,” White House spokesperson Andrew Bates said. “Now that President Biden is delivering real savings for the families who have been overcharged by Big Pharma for medicines they desperately need, they’re continuing to fight tooth and nail against the financial interests of American seniors. They’ll lose this fight too.”

A Narrow View

The study's counterintuitive findings reflect its narrow view of the drug pricing reforms established by the IRA and the timeframe chosen for comparison, said drug pricing policy expert Stacie Dusetzina, a research professor at Vanderbilt University School of Medicine and a member of the Medicare Payment Advisory Commission. The design of the study is “a bit disingenuous” because it compares 2026 to 2025 rather than using 2023 or 2024 as the baseline, she told the Pink Sheet.

The study misses the potentially dramatic savings that will be driven by the Medicare redesign, which will cap annual out-of-pocket spending at $2,000 and eliminate the Part D coverage gap, among other things, beginning in 2025, Dusetzina said.

“This is a pretty unfair comparison when you think about all of the changes to the Medicare program and the Part D benefit that have come right before this to relieve people from high costs,” Dusetzina said.

For example, “if you took Eliquis” and “in their example, had a $47 copay with each fill … you would have more copays [with a negotiated price] because you’re less likely to reach that $2,000 limit earlier in the year,” Dusetzina said.

But “what they’re not telling you is that in 2024 or 2023 or any prior year, the situation for someone taking Eliquis would have looked like a mix of $47 copays and then going into the coverage gap and having to spend roughly $125 in copays until you hit catastrophic coverage,” she added.

Negotiation Part Of ‘Suite’ Of Reforms

“To me it … is trying to frame [negotiations] as harmful … when in fact negotiations are part of a suite of reforms that are aiming to lower costs for beneficiaries and the Medicare program overall,” Dusetzina said. It “comes back to something I’ve tried to repeatedly impress on people, [which] is having your drug selected for negotiation is not necessarily going to be a windfall or a major penalty.”

Drug negotiation “is something we should think about as potentially saving the Medicare program money and that hopefully will result in premiums not going up very much or maybe premiums decreasing relative to what we would expect,” she added.

Policy experts will be watching Part D premiums closely in the wake of changes instituted by the IRA. The chance that the Part D redesign will substantially increase financial risk for plans contributed to a substantial increase in 2024 premiums.  (Also see "Part D In 2024: Premium Increases, Shrinking Choices Signal Early Impact Of IRA Redesign" - Pink Sheet, 4 Jan, 2024.)

“These drugs are being selected because they are the highest spending drugs in the Medicare program,” Dusetzina observed. “Medicare and taxpayers save money based on the negotiations” because “it’s being used somewhat to subsidize all the other changes [to Part D] that affect everyone, regardless of whether or not they take one of the negotiated drugs.”

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