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Medicare prepares for price negotiations with drug companies

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The Centers for Medicare and Medicaid Services are gearing up for a new federally funded program that is expected to save more than 49 million Americans billions of dollars in drug costs.

The Inflation Reduction Act, passed by Congress and signed by President Joe Biden last year, allows Medicare and Medicaid centers to negotiate prices with drugmakers for certain members. The move is expected to save Medicaid $10 billion over the next decade, with the savings first appearing in fiscal year 2026 and growing year over year, according to an August report from the Congressional. Budget Office.

“The law will make improvements to Medicare that will expand benefits, reduce drug costs, keep Part D premiums stable and, over the long term, improve the sustainability of the program,” a statement from the centers said. Medicare Part B covers medical care while Part D covers most prescription drugs.

The centers said they are in the process of recruiting more than 100 positions for the Medicare Drug Rebate and Negotiations group, which will include a variety of data and regulatory analysts, economists, managers and people with experience. in the pharmaceutical field. Staff will work in divisions focused on rebate agreements and price negotiations, policy, data and manufacturer compliance, and more, depending on the centers.

“CMS is currently meeting with individual pharmaceutical companies as well as trade associations to gather feedback and input during the implementation process,” the statement said.

Initially, centers will negotiate for only 10 Part D drugs which are among the most expensive as there will be no generic or similar alternatives available by 2026. The announcement for which drugs will be chosen is expected on September 1.

The number of drugs in price negotiations will increase in the coming years. In 2027, Medicare will negotiate for 15 Part D drugs. In 2028, they will negotiate 15 Part B or Part D drugs, then 20 Part B or Part D drugs each year thereafter, according to the centers. .

“This means people with Medicare will pay a fair price for negotiated drugs, and their cost sharing will be based on the Medicare-negotiated price,” the centers said in a statement. “Additionally, if drug companies increase the price of their drugs at a rate faster than the rate of inflation, they must pay a rebate to Medicare.”

Senator Tim Kaine, speaking after an August town hall on health care in Hampton, told the Virginian-Pilot that the Department of Veterans Affairs has been negotiating drug prices since the Part D program took effect in 2006, but Medicare has never negotiated drug prices.

Rep. Bobby Scott, D-Newport News, speaking after the same town hall, said Medicare Part D was originally supposed to include drug price negotiations, but to get enough votes to pass the law, they had to remove it.

Sen. Chuck Grassley, R-Iowa, explained in 2019 why Republicans were against negotiating Medicare prices, according to the US Senate Finance Committee website. Grassley said competition, not government mandates, must be allowed to “drive innovation, reduce costs, expand coverage and improve results.”

“It wouldn’t work if the federal government interfered in drug delivery and dictated which drugs would and wouldn’t be covered,” he said. “That’s why we wrote a non-interference clause into the law.”

In February 2017, a White House spokesperson said then-President Donald Trump favored Medicare negotiating drug prices to save money, according to Politico.

In late September, four Republican senators submitted a bill to block Medicare from moving forward with price negotiations, according to Congress.gov.

“Price controls never work,” said bill sponsor Mike Lee of Utah. “Instead, they exacerbate the problems they seek to solve. Imposing fixed prices on prescription drugs will ultimately shorten the lives of Americans. Instead of repeating the mistakes of the past, it’s time to tackle what drives the cost of prescription drugs and adopt a regulatory environment that benefits everyone.

Scott and Kaine also noted that the Cut Inflation Act will limit out-of-pocket drug costs for Medicare members to $2,000 per year. This will come into effect in 2025. Kaine said the centres’ ability to negotiate prices will also help those who don’t spend as much per year.

The Robert Wood Johnson Foundation, a nonprofit that focuses on health issues, has estimated that the cost of capping drug spending will be less than 1% of Medicare spending. But as a result of the cap, the foundation expects more than 860,000 Medicare members not eligible for cost-sharing protection to save more than $900 a year on average.

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