Understanding Medicare’s Negotiated Drug Prices: What Are The Real Savings?

Complications: Health Policy Unraveled

In mid-August, the Biden administration announced it had completed negotiations for the first 10 drugs in Medicare’s price program and that the new prices will be implemented in 2026. The achievement marks decades of effort and is a stellar achievement for the Democrats and the administration.

But Medicare already receives discounts and rebates on drugs, so it’s unclear what the savings will really be off the list price. And, as Stephanie Kennan points out, it is also unclear how much of any savings will filter through to patients because their costs will be determined by their insurance plans. Nor is it clear whether patients’ formularies will include the drugs whose prices were negotiated. Finally, Stephanie also describes how the Inflation Reduction Act fits into this landscape.

Meet Your Host

Name: Stephanie Kennan

Title: Senior Vice President, Federal Public Affairs at McGuireWoods Consulting

Specialty: Stephanie Kennan helps clients navigate the legislative and executive branches of the federal government to solve problems involving a variety of healthcare policy issues. Her work focuses on providers, medical device manufacturers, drug manufacturers and associations concerned about Medicare and Medicaid reimbursement.

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Episode Highlights

[00:47] The administration claims the prices for the first 10 drugs negotiated under the Inflation Reduction Act will save taxpayers $6 billion and another $1.5 billion to seniors in out-of-pocket costs.

[01:54] The Centers for Medicare & Medicaid Services based its savings figures off the list priced for drugs, but many of the drugs are currently available to Medicare plans for discounts and rebates.

[02:18] Medicare recipients don’t usually pay the list price for drugs; they pay the price dictated by their insurance plans.

[02:44] Some members of Congress and patient advocacy groups worry there aren’t enough rules to guarantee that insurance plans will include the first 10 drugs, with newly negotiated prices, in patient formularies.

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