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The Realities and Challenges of Medicare Negotiating Drug Prices

Laura Joszt
The notion of letting Medicare negotiate drug prices has been around for years, but has recently gained new traction under President Donald Trump. Panelists at the ISPOR 22nd Annual International Meeting, held May 20-24 in Boston, Massachusetts, discussed the complexities of allowing Medicare to negotiate prices and whether or not it would produce meaningful savings.
The idea to let Medicare negotiate drug prices has been around for years, but has recently gained new traction under President Donald Trump. Panelists at the ISPOR 22nd Annual International Meeting, held May 20-24 in Boston, Massachusetts, discussed the complexities of allowing Medicare to negotiate prices and whether or not it would produce meaningful savings.
 
Medicare isn’t allowed to negotiate drug prices because of the law, but the Congressional Budget Office (CBO) weighs in every once in a while on what savings might be realized if Medicare could negotiate drug pricing, Juliette Cubanski, PhD, MPP, MPH, of Kaiser Family Foundation, said.
 
Lifting the prohibition would only have a negligible effect on drug pricing, according to CBO estimates. Cubanski explained that this conclusion was reached because private plans already do a good job of negotiating prices and there’s no reason to believe the HHS secretary would do a better job. In addition, the HHS secretary doesn’t have the ability to create a formulary, and without that authority, he or she wouldn’t have a lot of negotiating power.
 
Where savings might be seen is in areas with unique drugs that have no competitive products; but even still, Cubanski said that savings might not be as large as people are expecting.
 
So why does the idea of allowing Medicare to negotiate drug prices remain popular? Public concern for rising drug prices is one reason. 
 
“This is a real pocketbook issue for people, a real concern for voters and policy makers to pay attention to what constituents are upset about,” Cubanski said.
 
Trump’s repeated mentions of allowing Medicare to negotiate is another reason. However, the unusual thing is that this has historically been an idea with the Democrat Party. There is legislation currently that would allow Medicare to negotiate drug prices. The bill also directs the HHS secretary to prioritize specialty and high-priced drugs in negotiations with a fallback that if negotiations fail—no agreement is reached after 1 year—then the price would be what the Department of Veterans Affairs (VA) pays. The HHS secretary would also be able to establish formularies. However, there is no CBO score yet on this legislation, so it’s unclear what the effect of these provisions might actually be.
 
“I think whatever you might think of the policy idea, the political headwinds are still blowing against this idea generally, although maybe not as strongly as they were before Trump came along and expressed support for the idea,” Cubanski said.
 


 
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