I bet you thought I forgot about this provision. Something the Democratic Party has been trying to provide Medicare recipients for years.  Lowered drug prices because Medicare is granted the ability to negotiate pharmaceutical prices directly with the manufacturers and marketers.  After all, Medicare is the largest purchaser of prescription drugs in the USA- and drugs are our fastest growing medical expense.  And, since Medicare accounts for 20% of all medical expenditures in the USA, of which 1/3 are on prescription drugs, this is a big, big cost center.

This provision was retained in the Inflation Reduction Act (sic) despite the tons of bucks big pharma (lobbying of some $ 150 million a year, with about the same in campaign contributions) has been spending for the past 30 years.  And, that’s because the concept is popular.  According to Kaiser Family Foundation, 83% of us are in favor of this new policy; that even includes more than 70% of GOP voters.

But, now, comes the reality.  The provision is chockfull of loopholes.  And, if that weren’t enough, the price negotiations are not scheduled to take effect for several years- not until 2026- and that’s initially just for 10 drugs.  The next year, we’ll add 15 more, then 30 more in 2028, and finally 40 in 2029 and later years. The HHS (Health and Human Services) Secretary will choose the first 10 targets from the 50 highest dollar volume drugs (Part D Prescription Program) and the 50 from Part B (doctor services and patient care) for negotiations in 2025.

Well, not quite.  If there are generic (for the past 9 years) or biosimilar (for the past 13 years) alternatives- or orphan drugs (theoretically small market drugs)- these drug formulations are off limits to the negotiated pricing program.

In other words, we are only going to go after those drugs that are at the tail end of their patent protected life span (20 years from date of patent application).

There is a proviso in this program, though, that may help negotiations proceed.  If big pharma refuses to negotiate the price of a targeted drug, an excise tax- 95% of the annual sales of that given drug– will be imposed.  (I’m not sure that will force them to come to terms- but it will make them keep negotiating, but maybe not in “good faith”.)

Another proviso in the act… Pharma must provide a rebate to Medicare for any price increases that exceed the rate of inflation.

(You should know that the VA (Department of Veteran’s Affairs) has the right to walk away from negotiations about drug prices- and drop those drugs for which it can’t get the price it wants for its formulary.  Medicare doesn’t have that capability.  It is required to cover any drug for which the FDA has granted approval- period.)

But, there’s more.  Because while there are rules for Medicare, the Part D Health Plan providers have been allowed to negotiate drug prices.  Even though Medicare lacks that capability.

And, Part D providers, like the VA, can also walk away from some drugs – but not as completely as can the VA.  For them to refuse a drug in their formularies, there must be at least two approved drugs in each category, plus nearly all (“substantially all”) in six protected classes- immunosuppressants, antiretroviral, anticancer, antidepressant, antipsychotic, and anticonvulsants.

Now that I gave you most of the problems with the program,  let’s consider other provisos that may provide us some pricing relief way before 2025.  There now is a maximum level for “out of pocket” spending on Part D pharmaceuticals.  That level- $ 2K a year- will be a valuable benefit for the 1.4 million folks who currently spend more than that on their drug provisions.

There also is a 6% limit to premium increases for Part D premiums for the years 2023 through 2030.  (And, let us not forget that Medicare patients now have a maximum insulin price of $ 35 a month.  That should help some 3.3 million Medicare patients.  [Remember, the GOP removed that cap for all non-Medicare patients when the Parliamentarian ruled that it was not subject to the reconciliation process.])

So, we will save money on prescriptions.  But, like most of the other provisions of the Inflation Reduction Act, there is a time lag before we can enjoy the benefits of those changes.