The Biden administration has announced a price cut on 10 of the most expensive and popular prescription drugs for Medicare beneficiaries, the first major breakthrough for the federal government’s ability to negotiate price cuts with major pharmaceutical companies.
Tim McBride, PhD, a professor of health policy and health economics at the Brown School of Washington University in St. Louis, said it was a breakthrough that was more than 20 years in the making.
“I think the big picture that I would tell people as a health policy maker who has been dealing with this for years is that prescription drugs are one of the biggest challenges in health care costs,” McBride said. “Drug prices are often very high, and one of the problems when you look at the United States is … the government has not been able to negotiate drug prices like other countries do.”
The White House reports that savings will range from $290 on Eliquis, a drug used to prevent and treat blood clots by 3,928,000 Medicare beneficiaries, to $9,141 on Stelara, a drug used to treat psoriatic arthritis by 23,000 Medicare beneficiaries.
The pharmaceutical companies argue that insured persons and taxpayers would not actually save any money because the drug price reductions would lead to higher premiums.
“I think it’s a little bit of a stretch to say that taxpayers are going to have higher costs here because beneficiary co-payments are going down because prescription drug costs are going down,” McBride said. “But I think part of their argument is that utilization could go up, maybe a spillover effect to other drugs. So maybe it gets a little bit more complicated.”
McBride believes that pharmaceutical companies have done “wonderful things” in terms of research and medical breakthroughs. “For an economist, the idea that people and the government should be able to negotiate prices is a no-brainer,” he says.
While this could encourage more people to enroll in Medicare and increase demand for covered drugs, McBride said, “Frankly, I think we should look at this as the beginning of sensible drug pricing.”
The federal government plans to extend the price reductions for Medicare beneficiaries to other drugs as well. The current price reductions for the drugs listed will not take effect until 2026.
