Saul Loeb/AFP via Getty Images
Americans pay much more than people in other countries for prescription drugs. This is driving voters crazy, and even though lawmakers have been vowing to do something about it for decades, they haven’t made much progress.
That could change as soon as this week. The Inflation Reduction Act – hammered out by Senate Majority Leader Chuck Schumer, DN.Y., and Sen. Joe Manchin, DW.V. – includes various provisions on drug prices and health insurance. The Senate plans to bring the bill up for a vote on Saturday, and it appears on track to pass Congress and be signed into law by President Biden.
All this is music to the ears of patients who have been burdened by expensive drugs for years.
“The out-of-pocket proposal that’s on the table right now would absolutely make a huge difference in my life,” says Medicare recipient Bob Parant, 69, of Westbury, New York. He has type 1 diabetes and pays about $5,000 out of pocket for insulin each year, more than thousands more for a heart drug.
Here are details about this proposal and others in the bill, as well as answers to some frequently asked questions.
What exactly is Congress changing about drug prices?
For the first time, the federal health minister will be able to directly negotiate the prices of certain expensive drugs each year for Medicare. This starts in 2026 with 10 drugs and increases to 20 drugs by 2029. To qualify for trading, drugs will have to be on the market for several years.
Then there’s the proposal Parant is most excited about: People on Medicare won’t have to pay more than $2,000 a year in prescription drug costs, which will make a big difference for seniors with certain conditions like cancer and multiple sclerosis. This will start in 2025.
And, starting next year, if drug companies raise their drug prices faster than inflation, they will have to pay a rebate to Medicare. This could affect many drugs – according to an analysis by the Kaiser Family Foundation. in 2019-20, half of prescriptions covered by Medicare increased in price faster than inflation. This provision could help discourage pharmaceutical companies from continually raising prices.
Do experts think it will make a difference?
In fact, many health policy experts believe these changes are important.
“This is a huge breakthrough,” says Tricia Neuman, who directs the Program on Medicare Policy at KFF. “Congress has been talking about doing something about drug prices for decades. [This] it may not be everything everyone wants, but it’s a really big deal and will provide significant help to literally millions of people who need it.”
“It’s a huge deal,” agrees Stacie Dusetzina, a professor of health policy at Vanderbilt University. “It really opens up a lot of new ground and fixes a lot of problems.”
The Congressional Budget Office, which analyzed an earlier version of the bill, estimates these changes would save the government $288 billion by 2031.
Why does it take so long for many of these things to start?
For someone on Medicare who spends $10,000 a year on cancer treatment, like Neuman’s friend, timing these changes can be difficult.
“Clearly, he’s going to be wondering next year, ‘Why am I still paying a lot of money?'” says Neuman. “Some things can’t happen fast enough just because it takes a while to get things moving.” much work by federal health agencies and industry groups to prepare for these provisions to take effect.
Neuman says she understands people are anxious for relief, but once provisions like the cap on Medicare go into effect, “that’s going to be a really big deal for people who rely on expensive drugs and for others who have seen their drug prices are increasing every year.”
I heard the bill will lead to fewer new drugs. It is true that?
This is an argument put forward by pharmacists to try to scare people into opposing these changes. The pharmaceutical and health products industry has spent more on lobbying Congress in 2022 than any other industry, according to the nonprofit Open Secrets. We are fighting hard to prevent these changes from becoming law because it would cut into their profits.
For example, PhRMA, the Pharmaceutical Research and Manufacturers of America, argues in an ad campaign that the bill’s drug pricing provisions could lead to fewer new drugs coming to market by “daunting research and development.” The trade association also singled out NPR in this industry-sponsored analysis from Avalere, which estimates the bill could cut drugmaker revenue by $450 billion by 2032.
But an analysis by the Congressional Budget Office estimates that the impact on drug development would be quite modest. About 15 of the 1,300 drugs would not be on the market in the next 30 years – that’s about 1% of new drugs. Also, most big pharmaceutical companies spend more on marketing than on research and development.
Some ads claim that Medicare will be cut. Is true?
These ads are misleading. For example, a project called Commitment to Seniors launched a seven-figure advertising campaign claiming that the Senate bill would “take nearly $300 billion out of Medicare.” In fact, that amount of money is what the government is expected to save because Medicare won’t have to pay as much for expensive drugs, it’s not money taken out of the Medicare budget. So the bottom line is that old people’s benefits would not be cut.
“When people see an ad on TV from a group called Commitment to Seniors, it sounds innocuous enough,” says Michael Beckel of Issue One, which tracks dark money. It turns out that Commitment to Seniors is a project of another group, American Commitment, which has given PhRMA more than a million dollars, including $325,000 in 2020.
Beckel says it’s not unusual to see the industry engage in such tactics. “The pharmaceutical industry is a major lobbying force and a major dark money player.”
What about insulin? Would people with diabetes get help with these prices?
Insulin is often the baby drug when it comes to out-of-control prices and life-or-death stakes. Insulin prices in the US are four times higher after rebates, on average, than in other countries, and about 1 in 4 diabetes patients have reported taking less insulin than prescribed because they can’t afford it. At this point, it’s unclear whether any of the proposed insulin price reforms — or at least the out-of-pocket costs to patients — will make it into the final bill.
A provision to cap copayments at $35 a month for people with insurance who take insulin has bipartisan support, but may not be included in the final bill.
What else is in the health bill?
The other big thing in the bill protects consumers from a potentially devastating change that would happen without new legislation.
People who buy insurance on Affordable Care Act marketplaces — such as Healthcare.gov and state marketplaces — will be able to keep generous premium subsidies for three more years. After these additional subsidies went into effect with the passage of the American Rescue Plan, the government estimated that 4 out of 5 enrollees qualified for a plan with premiums of $10 or less per month.
Krutika Amin, who works with Neuman at KFF, says it’s important for lawmakers to remove this extension now, as insurers are currently setting their prices for next year’s plans ahead of open enrollment in autumn.
“If Congress is able to extend the extra subsidies before the August recess, it will help provide certainty to both insurance companies and state and federal agencies running [the marketplaces] to be able to implement it in a way that is seamless for consumers,” he says.
Extra discounts on plans have made all the difference. Last year, 14.5 million people – more than ever before – signed up for insurance on Healthcare.gov, and an early analysis from HHS shows that the total number of people who were uninsured in the US hit a record low in the first few months of this year.
NPR Pharmaceuticals Correspondent Sydney Lupkin contributed to the report.