Dec 8, 2023 - Health

Drug negotiations could save seniors hundreds of dollars: study

Estimated effects of Medicare's Drug Price Negotiation Program on out-of-pocket spending
Data: Mathematica; Chart: Axios Visuals

Medicare negotiations of prescription drug prices could have cut seniors' out-of-pocket costs by nearly a quarter had the program been in effect in 2021, according to an analysis Mathematica provided first to Axios.

Why it matters: The research consultancy's analysis offers a glimpse at potential savings enrollees might see as Medicare begins negotiating the prices of certain high-cost drugs.

By the numbers: The analysis looked at the 10 costliest drugs for Medicare Part D in 2021, the most recent year for which complete data were available.

  • If Medicare negotiated the prices of those drugs, the average out-of-pocket costs for patients with Part D plans would have dropped 23% from $1,250 to $967.
  • The retail prices of the selected drugs would have declined at least 63% on average.

The analysis also found a meaningful difference in out-of-pocket spending reductions by race and ethnicity.

  • Asian Americans and Pacific Islanders would see the largest percentage decrease in out-of-pocket spending, while non-Hispanic Black people would have the smallest decrease in spending. The study authors said they are not sure what's driving the discrepancy.

What they're saying: "We estimate that drug price negotiation will lead to sizable reductions in Part D enrollees' out-of-pocket spending for all groups considered and that some groups will benefit significantly more than others," said Jia Pu, senior researcher and lead author of the study.

  • "Given the established reality of health care disparities more broadly, it will be important as we move forward to understand why these differences exist."

Catch up quick: In August, the Biden administration named 10 drugs that will be part of the first negotiations. They cost Medicare a combined $50 billion last year before accounting for rebates and other discounts.

  • Just three of the drugs in the Mathematica analysis of 2021 data were on the Biden administration's initial list of negotiated drugs.
  • Some of the highest-cost drugs were approved too recently to qualify for negotiations, and Mathematica said its analysis suggests expenditures can change significantly from year to year.
  • The negotiated prices for the first set of drugs are set to take effect in 2026, but lawsuits could delay or even prevent the law's implementation.
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