October 24, 2018 at 5:00 am ET
With the open enrollment period for Medicare now in effect, more than 43 million American seniors will be choosing a Medicare Part D prescription drug benefit plan for 2019. This year’s enrollment period also marks the 15th anniversary of the passage of the bill that led to the creation of the Medicare prescription drug program, and its impact has been nothing short of remarkable.
Each year since its inception, the Part D program has enabled seniors to access the medicines they need at a price they can afford — all while keeping premiums down and consistently operating under budget. In fact, this year is the second in a row in which monthly premiums are projected to decline.
What’s more, seniors have plenty of plans to choose from, depending on their health and prescription drug needs, making Medicare Part D a rare example in our complex health care system of a program that provides patients options and control over their care. But despite the broad success of Part D, the administration is currently considering changes that could limit the ability of plans to negotiate savings for seniors in the form of rebates on prescription drugs. The result could significantly undermine access and affordability for seniors.
That’s because the prescription drug coverage provided by private insurers in Medicare Part D relies on pharmacy benefit managers to negotiate discounts from big drug companies in order to deliver savings and high-quality care for seniors. If PBMs can no longer negotiate rebates, premiums and drug prices will most certainly go up. Here’s why.
Discounts that PBMs negotiate from the drug companies, known as rebates, have become increasingly important given today’s reality of out-of-control prices set by drug companies. For the past five years, drug companies have increased annually the price of every single one of the 20 most prescribed drugs for seniors by an average of 12 percent.
More shockingly, 12 of the 20 most commonly prescribed brand-name drugs for seniors saw price increases of more than 50 percent in the five-year period, and prices for six of the 20 drugs were increased by more than 100 percent. This situation is unsustainable for seniors in Medicare Part D and for the taxpayers who support the program.
Research firm Oliver Wyman projected that over the next decade, PBM-negotiated discounts will save Medicare Part D more than $600 billion. Generally, most of these negotiated discounts, or rebates, are passed back to the Part D plans that use them to help lower premiums.
The policy changes currently under consideration by the administration could further undermine the competitive marketplace in Part D, as well as an important tool needed to lower drug prices and help contain costs. A rule pending at the Office of Management and Budget might do away with these negotiated discounts and could do so without putting in its place any new mechanism to serve as a check on skyrocketing drug prices.
Our system as it stands today is by no means perfect, and we all have a role to play in finding ways to lower drug prices for Americans. But Medicare Part D is working for seniors. Eliminating rebates could lead to premium increases of more than 50 percent or even higher. In order to hold seniors harmless from this policy change, drug companies would need to voluntarily reduce prices by 45 percent — an unlikely event given the Associated Press report that found 96 drug price hikes for every one price reduction in 2018.
It is vitally important to weigh the real consequences of any proposed changes to the program against the stability and affordability on which 43 million seniors have come to rely. As we search for ways to keep Medicare working for seniors and to lower drug prices, it is imperative that we preserve and enhance the tools that can provide seniors with stability and control, not limit them. This will be key to the program’s success for the next 15 years and beyond.
Debra Barrett is the executive director of the Coalition for Affordable Prescription Drugs.
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