A provision in the Reducing Inflation Act that allows Medicare to negotiate the prices of the most expensive prescription drugs each year will likely save the US billions of dollars, as long as the pharmaceutical industry doesn’t interfere, according to a study published Friday in JAMA Health Forum. .
Starting in 2026, Medicare will begin negotiating the price of 10 drugs that cost the federal government the most money, followed by 15 more drugs in 2027, another 15 drugs in 2028, and another 20 drugs in each subsequent year.
Researchers at Brigham and Women’s Hospital and Harvard Medical School estimated how much money the new policy would have saved the US if it had been in place between 2018 and 2020, the most recent years for which spending data is available. from Medicare.
They identified 40 drugs that would have been selected by Medicare for drug price negotiation under the Reduction of Inflation Act provision.
Under the policy, the negotiation process applies to drugs that have been on the market for a certain amount of time (nine years for drugs and 13 years for biologics) and only if the drug has no comparable alternative, such as a generic. .
Most of the drugs on the list from 2018 to 2020 were reimbursed under Part D, the Medicare benefit that covers prescription drugs taken at home, although some were under Part B, the Medicare benefit that covers drugs administered in a hospital or infusion center.
The researchers simulated the negotiated prices using the so-called maximum price, which is at least 25% below the average price that drug manufacturers charge non-governmental entities, such as private health insurance providers. According to the Inflation Reduction Law, the maximum traded price must be lower than this maximum price.
The researchers found that Medicare’s drug bargaining provision would have saved the US $26.5 billion, or 5% of all drug spending, over those three years.
“That’s a pretty significant reduction in spending for a very small number of medications,” said study lead author Dr. Benjamin Rome, a primary care physician at Brigham and Women’s Hospital and an instructor at the College of Medicine at harvard.
Robin Feldman, an expert in pharmaceutical and intellectual property law at the University of California, San Francisco (formerly University of California, Hastings) School of Law, said the study “shows what is possible,” assuming the pharmaceutical industry does not undermine the impact of the law before it enters into force.
“Pharmaceutical companies are likely to fight hard against the interpretation of each provision so that the hammer does not fall on their drugs,” said Feldman, who was not involved in the study.
The Centers for Medicare & Medicaid Services said earlier this month that it is still working on its plan for how exactly it will implement negotiations with drugmakers. It plans to publish a list of the first 10 drugs it will target for drug price negotiations in September.
Meanwhile, Tricia Neuman, a Medicare expert at KFF, formerly known as the Kaiser Family Foundation, said many in the pharmaceutical industry are likely looking for ways to get around provisions that affect their ability to maintain their high profits.
“I don’t think anyone is surprised to see the industry go backwards,” said Neuman, who was not involved in the study.
Rome, the study’s author, said one way drug companies could circumvent the law is to allow a select few manufacturers to make generic versions of their drugs before they’re ready for sale.
They could also avoid negotiation through “perpetuation,” he said, which occurs when a drugmaker makes incremental changes to its product and then reintroduces it to the market as a reformulated version.
Still, he said, Medicare’s ability to negotiate drug prices should provide long-term savings for the US.
It should provide “very, very high discounts,” he said.
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