Dr Inma Hernandez Discusses Potential Cost-Saving Effects of the Medicare Drug Price Negotiation Program


Inma Hernandez, PharmD, PhD, professor at the University of California, San Diego Skaggs School of Pharmacy and Pharmaceutical Sciences, discussed the potential sources of savings associated with the Medicare Drug Price Negotiation Program.

CMS's review and approval of formulary replacement of negotiated drugs will play an important role as a potential source of savings for prescription drugs, Inma Hernandez, PharmD, PhD, professor at the University of California, San Diego Skaggs School of Pharmacy and Pharmaceutical Sciences, explained.


Can you discuss the sources of savings you foresee because of the Medicare Drug Price Negotiation Program (DPNP), and its impact on health insurance?

I see the sources of savings as 3, and I'm going to go through them. I think it's going to be very important to understand this as the negotiated prices are going to be published late this year, and we will be thinking about comparing those to the prices we were paying for drugs already.

I think one source of savings, which is the most immediate one, is the drugs that had net prices higher than the minimum statutory discounts set by the stature. So, drugs like that would be Stelara (ustekinumab) for instance, as we talked about in the session during ISPOR.

Then the second source of savings will be the ability of CMS to negotiate prices below the ceiling. I like to say that's an uncertain source of savings, as we don't know how much we're going to generate in savings from that, but [it's] expected, meaning we hope that they will be able to get drug prices negotiated prices below the ceiling.

And then the third source of savings that I think sometimes people don't realize, but I think it's important to think about it as we run numbers later this year, is the fact that we are going to index drug prices for 2026 on 2022 data. And it's going to be hard to estimate that because it’s going to be about the counterfactor, right? What do we think would have happened to net prices in those years absent negotiation? But the point is, and I'm saying that because I've tried to work through the numbers, what assumption you make for what would have happened to the net prices in those years actually makes a lot of difference, because we're talking about the annual rate that is 4 years. So, if you think that net prices could have increased by 3% every year, you get much more savings than if you think that the prices could have been stable. But maybe in some drug classes, net prices could have decreased because we know there's more competition.

I think that's an uncertain source of savings that probably we're not going to be able to have a good answer with data, because we just don't know what could have happened. But I just wanted to point out for the viewers, because I think what assumptions one grants on that sense, actually is going to make a huge difference on what one estimates in terms of savings.

Given the progress made so far with the DPNP, what potential implications do you see for formulary coverage within Medicare Part D and its potential ripple effects on private health insurance plans?

I think they had some texts on the last guidance released right before ISPOR. I think it's still a little bit unclear how CMS is going to look and review on what they are going to approve in terms of formulary placement of negotiated drugs. It seems clear that they do not want Part D plans to disadvantage the negotiated drugs and they do not want them to be placed on tiers above other drugs within the class. I think it's harder to speak as of the effects on the private market. So I guess we'll have to wait and see what happens in the private market.

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