Private Medicare Plans May Gain Ability to Negotiate Prescription Drug Prices

The Trump Administration recently announced its intention to give private Medicare plans the power to negotiate drug prices with insurance companies in hopes of lower the the costs of vital medicines that seniors rely on to live healthier lives. Currently, private Medicare health plans under Medicare Part D must cover all or “substantially all” drugs in six “protected” classes, such as HIV treatments, antidepressants and cancer drugs, regardless of cost.


The Administration’s stance is that because insurance companies are required by their agreements with the Centers for Medicare and Medicaid Studies (CMS) to fully cover these medications, there is little incentive for the pharmaceutical companies that produce these drugs to lower prices for consumers. Part of the proposal would allow health insurance plans to exclude some of the protected drugs that see prices increases beyond the pace of inflation and new formulations not considered a “significant innovation” compared to the original.


“The lack of any ability for Part D plans to manage drugs in the protected classes has allowed the pharmaceutical industry to command high prices on protected class drugs in Part D, without patients getting a good deal,” Centers for Medicare and Medicaid Services Administrator Seema Verma said in a statement.


Perhaps the most controversial aspect of the plan would be allowing insurance companies to policies called prior authorization and step therapy. Under these scenarios, patients would be required to try cheaper drugs before turning to more expensive ones, regardless of what their doctor prescribes. Officials claim the move could save American taxpayers an estimated $692 million over a decade.


“By bringing the latest tools from the private sector to Medicare Part D, we can save money for taxpayers and seniors, improve access to expensive drugs many seniors need, and expand their choice of plans,” Health and Human Services Secretary Alex Azar wrote in a recent blog post.


The plans is already facing pushback from not only insurance companies and drug manufacturers but also patient advocacy groups that worry the changes could disrupt systems that are working well for many seniors. Claiming “patients will be in the driver’s seat,” Administration officials pushed back against some of that criticism, arguing that seniors have the option to choose a different plan that better meets their needs if their current plan does not take advantage of the new flexibilities offered by the proposed changes.

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