Finally, doing something to reduce health care costs…maybe!

The Department of Health and Human Services (HHS) has released the names of the top ten high cost drugs that will be subject to Medicare price negotiations. This is an important step in helping to lower prescription drug costs both for patients and the payers in Medicare and Medicare Advantage plans.

Medicare, primarily serves Americans aged 65 and over. Medicare pays two times more than the U.S. Department of Veterans Affairs, which already negotiates drug prices, according to President Biden.

How did this happen? When the Medicare Part D program was created, the Bush Administration accepted a contract that prohibited price negotiations for medications. No new taxes were assessed, so the plan was unfunded, essentially the opposite of “tax and spend”, just spend without any funding, and cripple any cost controls process. What could go wrong?

The Congressional Drug Pricing Investigation report released Dec. 2021 stated, “From 2012 to 2017, drug companies raised prices for the 20 most commonly prescribed brand-name drugs in the Medicare Part D program,… approximately ten times the average annual rate of inflation …US patients pay more than twice as much for their prescription drugs as patients in 32 other developed nations.”

This report shows the myriad of ways that the pharmaceutical companies have gamed the system to maintain high profits and stifle competition.

The U.S. Centers for Medicare & Medicaid Services (CMS) spent $50.5 billion between June 1, 2022 and May 31, 2023 on the 10 targeted drugs. This is 1/5 of the total cost of drugs in the program. Number one was Eliquis at a cost of $16.5 Billion for 3.7 million Medicare enrollees.
We all know that shopping can result in lower prices and nowhere is that more evident than prescription drugs.

Eliquis is a fine example. There is currently no generic approved in the US, although the generic apixiban is approved in Europe and other countries with no apparent negative effects.

Typical dosage is 5 mg twice daily. The retail monthly cost at Longs or CVS is $587 under my husband’s Silver Script Medicare Part D Rx . This plan has no deductible. The patient copay in the initial coverage phase is $47 monthly. The plan pays the difference of $540 monthly.

The insured patient share of cost rises in the next coverage phase to $141 per month, until the individual reaches the catastrophic phase. This is determined by the total retail cost of all their Rx.

Canadian Pharmacy World is an online vendor that allows the buyer to choose the source and fully discloses the price for Rx. For example, the brand name version of Eliquis sourced in Canada is $457 for 90 days supply ($152 monthly) and the generic sourced in Turkey is $179.99 ($60 monthly).

Assuming the individual is taking no other medication and drugs purchased in Canada are not eligible for insurance reimbursement, the individual would pay the full annual cost of $720 for Eliquis, which is less than the annualized premium only for the Silver Script plan ($829).

Under Silver Script the full annual retail cost of $7044 is split between the patient and Medicare. All the drugs targeted for negotiations have been on the market for over 7 years and no generic equivalent available. I would venture to say that Big Pharma isn’t going to go broke if prices are reduced.

If one is hesitant to purchase medications from overseas, consider how many of these drugs are actually now manufactured outside the US, and with what adverse effects? PharmacyChecker published the report, “Not Made in the USA: The Global Pharmaceutical Supply Chain and Prospects for Safe Drug Importation.” The report argues that drugs manufactured outside the US are no less safe, but much less expensive.

Further, lower costs mean increased patient compliance.

The ACA (Affordable Care Act) helped reduce individual premiums and standardized benefits, but did little to address the actual costs of health care. The Biden administration has finally done so. Implementation is effective in 2026, protecting the pharma folks for a few more years, but these $Billions of savings could help to keep Medicare on sound financial footing.

In the interim, the administration is facing legal challenges from the pharmaceutical industry and the Chamber of Commerce. Since 47 donors represent donations of >$1 million and more than half of the organization’s funding, I suspect pharma money is talking loudly.

Commercial insurance plans use Medicare as a benchmark and will no doubt be watching this closely as an opportunity to reduce their costs as well. If the Biden administration loses in the courts, we all lose. This is not a high profile issue, but should be closely watched by all Americans.

If you appreciate Margaret R. Beck’s informational columns, please consider a contribution to A News Cafe. Thank you.

Margaret R. Beck

Margaret Beck CLU, ChFC, CEBS started her insurance practice in Redding in 1978. She founded Affiliated Benefit Services.

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