Many celebrated the historic progress in health care that the House passed the Inflation Reduction Act on Friday. While Medicare is widely credited with finally starting to negotiate drug prices, not everyone agrees that this will have a huge impact on the pharmaceutical industry.The bill excludes individuals covered by private insurance and frees pharmacy benefit managers who negotiate drug prices
The Reducing Inflation Act includes a provision that Medicare will begin negotiating drug prices in 2026, a top aspiration of some lawmakers who have been trying for years to get the government to intervene more in the drug pricing industry.Congressional Budget Office estimates These provisions will save By 2031, Centers for Medicare and Medicaid will serve nearly $102 billion. At the same time, skeptics say more government intervention could lead to less innovation and affect the relationship between drug companies and investors.
Some parts of the prescription drug industry may only be minimally affected, said Steven Bennet, a partner in Frier Levitt’s healthcare practice group.
“In general, when drug prices are high or rising, industry players who profit from high drug prices benefit financially. Efforts to slow drug price growth or lower drug prices will have an impact on many industry players,” Bennett said. He concluded, however, that “the real impact on the relationship between industry players is very complex, and the Senate bill will likely have minimal impact on much of the industry.”
Earlier drafts included inflation rebates for higher drug prices in the Medicare and private insurance markets, Bennet noted. However, the application of the inflation rebate for the private insurance market has been removed in the current version.
Another provision that Republican lawmakers removed from the package ahead of Senate passage capped insulin costs at $35 a month. While Republican lawmakers rejected a portion of the proposal that would lower the cost of insulin for privately insured patients, they retained the rule limiting the monthly cost of insulin for Medicare patients.
It’s also worth noting that prescription drug middlemen — pharmacy benefit managers (PMBs) — are excluded, which, according to Bennet, shows the bill’s limited impact on the pharmaceutical industry. PBMs, which negotiate drug prices on behalf of insurance companies, are often owned by insurance companies and have come under the spotlight of the Federal Trade Commission for corruption.although The FTC is currently investigating The impact of vertically integrated PBMs on the availability and affordability of prescription drugs, they are out of the woods in this package.
One provision of the bill that is sure to have a big impact is a $2,000 cap on out-of-pocket costs for Medicare beneficiaries, Bennet said. “This will lower the annual cost of Medicare patients taking brand-name or generic drugs,” Bennett said.
Three years from now, Medicare will negotiate the price. But the scope will be limited. Medicare will negotiate drug prices for just 10 high-cost drugs without generics or biosimilars that have been on the market for several years, and then more will be brought to the table for negotiation over time.
“The impact of this rule on drugmakers will be modest in the short term, but they will likely assess the impact on drug pricing as this negotiating power will expand over time,” Bennet said.
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