Illustration: Aïda Amer/Axios
Democrats' push to allow Medicare to negotiate prescription drug prices has been limited to older drugs without generic competition, but even so, many of the program's costliest medicines would still be eligible.
Why it matters: Direct government negotiations would plug some holes in the system, which is dependent on market competition to contain prices. But it turns out there are a lot of holes, and even older drugs with generic competition can cost the federal government billions of dollars each year.
State of play: Democrats landed on a scaled-back version of Medicare negotiations last year after compromising with a number of more pharma-friendly members.
- Instead of allowing the HHS Secretary to negotiate the prices of hundreds of drugs without competition — as House Democrats originally proposed — the version the chamber ended up passing limited negotiations to 20 drugs per year, once fully implemented.
- It also restricted drugs subject to negotiation to those that have been FDA-approved for several years — 9 for small-molecule drugs and 13 for biologics.
Between the lines: It turns out that adding that extra requirement still leaves plenty of bite in the measure, at least in theory, because nearly all of the drugs that cost Medicare the most money — at least in 2019 — are older, according to a Kaiser Family Foundation analysis from January.
- And yet many of these drugs are exempt because they have generic competition — even though this competition doesn't stop manufacturers from raking in billions of federal dollars each year.
- The KFF analysis doesn't take into account a compromise Senate Democrats released earlier this month, which, among other things, allows the secretary to delay negotiating the price of biologics that are highly likely to have generic competition within two years of the negotiated price taking effect.
By the numbers: Of the 20 Part B drugs and the 20 Part D drugs that cost Medicare the most money in 2019, more than half would still qualify for negotiations under the Democrats' framework, unless new generics or biosimilars come to market, per KFF.
- Only 8 of the top 20 Part D and 7 of the top Part B drugs have an approved generic or biosimilar — but these include drugs like the blood-thinner Eliquis and the cancer drug Revlimid, which still cost Medicare $7.3 billion and $4.6 billion, respectively, in 2019.
- But these drugs' placement on the list of top Medicare spenders suggests a problem, said KFF's Juliette Cubanski, one of the authors of the analysis. "Something is not working right here if we continue to spend billions of dollars on drugs where there are generics or biosimilars available," she said.
Yes, but: Drug companies can recoup whatever money they lose from lower negotiated prices on old blockbusters by raising the launch prices of new drugs, some analysts say.
The bottom line: For all of the consternation about exempting new drugs from Medicare negotiations — plenty of which have eye-popping prices — excluding drugs with generic competition would be costlier, at least among the programs' top spenders.
- “When we think of really expensive drugs, we think of new blockbuster products, when in reality it's drugs that have been around for a long time and their list prices have gone up and up and up," Cubanski said.