Nearly 9 million Americans benefit from Medicare drug price reductions

When Teresa Smith is asked what she thinks about the high medical bills she and her husband pay each year, her answer is simply: “Help!”

Smith takes Farxiga, a daily medication to control her type 2 diabetes, and so does her husband. He also takes the blood thinner Eliquis for a heart condition.

The couple is enrolled in traditional Medicare insurance and pays more than $7,600 for a Part D drug plan and a Medigap supplement plan that covers some remaining costs. In addition, they pay about $6,000 out of pocket annually for prescription drugs, according to Smith.

Smith and her 67-year-old husband are retired. Their entire retirement income comes from Social Security, which this year amounts to $45,500. They also receive $250 a month from a small pension.

“This is all we have,” Smith, 72, a former mortgage lender from Homer, Georgia, told Yahoo Finance. “We rely on our Social Security check for our daily needs and it's unbelievable what we pay for our health care. It's ridiculous.”

Help is finally at hand for the Smiths – and millions of other Medicare recipients.

This month, the Centers for Medicare and Medicaid Services (CMS) released its first negotiated drug price list, which includes drugs that 8.8 million Medicare beneficiaries relied on in 2023 to treat conditions such as cancer, diabetes, blood clots, heart failure, autoimmune diseases and chronic kidney disease.

The list included Smith and her husband's prescription drugs Eliquis and Farxiga.

List prices for the drugs will be reduced by 38 to 79 percent. Most will be in the 60 percent range. The new prices will take effect starting January 1, 2026, for people with Medicare Part D prescription coverage and include Medicare Advantage plans.

“This is a major step forward in helping older adults who are under pressure from high health care costs while living on limited income,” Ramsey Alwin, president and CEO of the National Council on Aging (NCOA), told Yahoo Finance.

“Millions of older people must take multiple prescriptions for multiple chronic illnesses, and for too many, that means making difficult decisions about whether to pay for medications or other daily expenses,” Alwin said.

Like Smith, nearly three in 10 Americans have trouble paying for the medications they need, according to a survey conducted last year by the nonprofit health policy research organization KFF.

“This will result in significant savings for people who are really struggling with drug prices,” said Leigh Purvis, AARP drug policy expert. “Many patients I've spoken to have had to make really difficult decisions about whether to pay for their medication or their rent.”

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Savings depend on the plan

The exact savings can vary greatly from senior to senior.

“The savings will depend to some extent on the plan individuals are enrolled in and the type of cost-sharing they currently pay,” Juliette Cubanski, deputy director of the Medicare Policy Program at KFF, told Yahoo Finance.

“For some of these drugs, plans typically charge a flat copayment amount that is not dependent on the underlying price of the drug,” she said. “But if you are a patient who must pay a copayment or a percentage of the drug's list price, you may save money if there is a lower negotiated price that is used to calculate your copayment amount.”

For example, if you pay 25% of the price of a drug and the government has negotiated a lower price, then you pay 25% of a lower amount.

“The new drug prices will help increase pension income, which has so far not kept pace with the increased cost of living for older people,” Alwin said.

It's not yet clear how Medicare providers will respond to recent drug pricing changes. “There's a possibility they'll limit the number of drugs they cover,” Purvis said. “Currently, they cover about 75% of the drugs on the market.”

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But that is still more than a year away. However, help will arrive much sooner.

Under the Inflation Reduction Act, Medicare enrollees will not have to pay more than $2,000 per year in copayments or deductibles for prescription drugs covered by their plan starting in 2025. This year, the maximum was $3,500.

The spending cap applies to primary Medicare beneficiaries who have a Part D drug plan and to beneficiaries with a Medicare Advantage plan that includes prescription drug coverage. Part D premiums are not considered in the spending cap.

For the really expensive drugs on this list, such as the blood cancer drug Imbruvica, this $2,000 cap will have a significant impact on patients' out-of-pocket costs, Cubanski said.

“People spend thousands of dollars every year on this drug,” she said.

How to reduce your healthcare costs now

In the meantime, until the renegotiated drug prices take effect, here are some things you can do to reduce your healthcare costs.

Renew or change plans during open enrollment

In mid- to late September, your current Medicare prescription drug provider or Advantage plan will send you an Annual Notice of Change (ANOC) that details any changes to your coverage, costs, and specific drug or medication coverage that will take effect in January.

Be sure to learn more about the new health insurance plan and consider making changes during the fall Medicare open enrollment period, which is just around the corner and begins October 15 and runs through December 7.

This is your chance to purchase, switch, or cancel a plan with new coverage effective January 1, 2025.

Each year, plans can change not only in the drugs they cover, but also in costs such as premiums, deductibles and copayments. Make sure the plan covers your doctors and other providers in its network, that the plan covers all of your medications, and that your pharmacy is preferred and in-network.

“I know it can be difficult,” Cubanski said. “There are a lot of plans out there and especially if you're taking a lot of medications, that comparison can be pretty overwhelming.”

But the reward can come in the form of lower out-of-pocket costs, especially for older people who may be living on relatively low incomes. “Even a small saving can add up to significant savings overall,” she said.

Get advice if you are overwhelmed

The wide range of Medicare and Medicare Advantage plans to choose from can be overwhelming. The average Medicare beneficiary will have a choice of nearly 60 Medicare plans with Part D drug coverage in 2024, according to KFF, including 21 stand-alone Medicare plans and 36 Medicare Advantage plans.

The State Health Insurance Assistance Program (SHIP) network offers one-on-one counseling in every state. You can find your local SHIP here.

The Medicare Rights Center offers a free consumer hotline: (800-333-4114.) You can also contact Medicare directly at 800-633-4227 to find Medicare Advantage and Part D plans in your area and enroll directly.

You can review Medicare plan options using Medicare's online, searchable plan finder on the Medicare.gov website.

Talk to your doctor

There may be less expensive alternatives for the medications you're taking, so it's always good to talk to your doctor to see if there's an alternative covered by your plan, Purvis said.

If you have limited income, you may be eligible for Medicare Extra Help, which covers Part D premiums and deductibles and caps drug costs.

“My 74-year-old brother was given Eliquis after he was diagnosed with heart valve insufficiency and cardiac arrest,” Mary Johnson, a policy analyst for Social Security and Medicare, told me. “He is eligible for Extra Help and can get Eliquis for about an $11 deductible for 90 days when dispensed by a pharmacy.”

He's lucky. “His primary care doctor told us that he had to prescribe older, less effective blood thinners to patients because their drug plan didn't cover Eliquis due to cost reasons.”

Find out about discounts from manufacturers

The drug companies themselves sometimes offer drugs at reduced prices if you qualify. Smith, for example, also takes Ozempic to treat her diabetes, but that is funded by a grant from the drug manufacturer through the Patient Assistance Program.

Consider discount sites or merchant programs

There are discount cards from sites like GoodRx that can sometimes lower the cost if you need a drug that isn't covered by your drug plan or you would otherwise have to pay a high deductible, Johnson said. However, you may need to compare the pharmacy with the lowest cost and have a prescription sent to that pharmacy to use the Good Rx card, she said.

Amazon's RxPass program lets Prime members buy more than 50 common medications for a flat fee of $5 a month. Costco, CVS, Walmart and grocery stores like Shoprite also offer programs.

Kerry Hannon is a senior columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, includingEverything under control at 50+: How to succeed in the new world of work” and “Never too old to get rich.” Follow her on X @kerryhannon.

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