Biden's law lowers drug prices, even if side effects may vary

These negotiations were part of the Inflation Reduction Act, which came into force in 2022. However, the lower prices are not scheduled to take effect until 2026.

The drugs are purchased through Medicare Part D, a prescription drug coverage program for Americans ages 65 and older. The 10 drugs were taken by 9 million patients with Medicare insurance in 2023 and accounted for $56.2 billion of total Medicare spending. Had the negotiated prices been in effect that year, the government estimates Medicare would have saved about $6 billion.

To put that in perspective, total annual prescription drug spending in the United States exceeds $405 billion, and Part D alone costs more than $215 billion.

As a scholar who studies health care policy, I am skeptical that the negotiations will ultimately have a significant impact on the U.S. health care system.even if the law survives ongoing legal and implementation challenges.

However, I expect that many older people will see significant savings in their out-of-pocket spending on prescription drugs. This will be primarily due to other provisions of the Inflation Reduction Act.

The Inflation Reduction Act allows the Centers for Medicare and Medicaid Services to negotiate prices with the companies that make some of the most expensive drugs in the Medicare program, including life-saving cancer and diabetes drugs. like Imbruvica and Januvia.

Democrats have welcomed these drug pricing regulations, and Vice President Kamala Harris, who is currently running for president, is making efforts to rein in drug prices part of her campaign.

Former President Donald Trump has been relatively quiet on the issue, and opinion polls show overwhelming public support for the policy.

Medicare will soon begin negotiating prices for more drugs, including 30 drugs over the next two years.

If the policy proceeds as planned, the U.S. government is expected to save $98.5 billion through drug price negotiations by 2031.

The Biden administration hopes to pass some of those cost savings on to Americans ages 65 and older by lowering Medicare Part D premiums and reducing deductibles. The White House also hopes to reduce the budget deficit by $237 billion.

The Inflation Reduction Act contains additional provisions that may be even more beneficial to older people.

It caps older adults' out-of-pocket costs for prescription drugs to no more than $2,000 per year through 2025. It limits the growth of Medicare Part D premiums. It provides rebates when price increases for certain drugs outpace inflation. It eliminates co-payments for vaccines and provides premium subsidies for low-income people age 65 and older.

Despite their vocal opposition, US pharmaceutical companies participated in the price negotiations.

The devastating alternatives for the companies – including paying a fine that could amount to up to 95 percent of their U.S. drug sales and being required to remove their drugs from the Medicare and Medicaid markets – proved to be powerful incentives.

But drug manufacturers are fighting this measure in court. And despite several losses, this fight will likely continue with an uncertain outcome.

Americans pay significantly more for prescription drugs compared to people in countries with similar economiesFor example, per capita spending on pharmaceuticals in the United States in 2022 was $1,432, in Germany $1,042, and in France $766.

Drug costs are a major burden for Americans. People over 65 are particularly affected. One in five people do not take all of their medications as prescribed due to the high costs.

The administration's efforts are a step in the right direction. The potential for real savings for Americans ages 65 and older will undoubtedly increase as more drug prices are negotiated.

But the actual impact on Medicare patients may be much smaller than it seems, because the Medicare program and patients already receive discounts on many of these drugs. These discounts will now be eliminated.

In addition, the pharmaceutical industry has a history of cleverly exploiting loopholes that could limit the financial impact even further. Manufacturers have already told shareholders that they expect little impact on their profits.

It's also possible that for Americans not covered by Medicare, prices could rise even for those same drugs. Working Americans could end up having to bear an ever-increasing burden to provide this support for older adults.