A win for Medicare patients and their wallets

Medicare patients will be feeling a release of financial pressure thanks to the latest sweeping bill passed through Congress. The changes mandated by the Inflation Reduction Act are to be implemented in the coming years, marking crucial wins in the fight to make medications affordable for older Americans.

The primary accomplishments of this bill are allowing Medicare to negotiate certain drug prices and capping the price of insulin for Medicare patients. These changes have been in the works for over a decade, with politicians going back and forth over their impacts despite them having strong and steady public support

The major fault of this bill, however, is the exclusion of privately insured and uninsured patients. Given that the majority of Americans are privately insured and  10% of the US population is uninsured, a huge chunk of the population does not stand to benefit from these changes. Critics are right to point out that the uninsured face the steepest financial burdens to accessing care and yet this bill will not help them.

The Inflation Reduction Act allows Medicare to negotiate prices

Starting in 2026, Medicare can negotiate pricing for 10 drugs, set to grow in number in the following years. The targeted drugs have not yet been named, but based on the highest-priced drugs in 2020, potential candidates could be blood thinners Eliquis and Xarelto, cancer immune therapies Keytruda and Rituxan, diabetes drug Januvia, and others.

Price negotiation is restricted to these specific, high-spending drugs with limited generic options but will likely be impactful – a recent study in Health Affairs revealed that over a third of adults enrolled in Medicare did not fill prescriptions for drugs to treat cancer, hepatitis C, and immune disorder primarily because of the cost.  

If a drug is selected, this bill directs a minimum price reduction of 25%. If the drug has been on the market for a while and it is not new, the manufacturers may be required to drop their prices by up to 60%. Non-compliance results in a financial penalty between 65-95% of a drug’s sales. Should the manufacturer raise prices higher than inflation, they must pay a rebate to the government.

Another crucial feature of this bill is capping out-of-pocket spending for Part D Medicare enrollees. This is a victory for patient advocates across the nation, as it eliminates the so-called “coverage gap” that has been sinking patients into financial troubles with surprise billing. Starting in 2025, out-of-pocket spending is capped at $2,000 annually, potentially benefiting millions of seniors enrolled. 

As with most things in healthcare policy, though, this bill is not perfect. For starters, it only applies to Medicare, meaning citizens under the age of 65 do not benefit. Critiques have been made regarding how this all applies to residents of Puerto Rico. The pharmaceutical industry is not thrilled about these changes, saying that Medicare price negotiation will lead to reduced innovation and fewer new cures. Given that high prices don’t buy us better drugs now, their claim that lower drug prices will stifle innovation is shaky at best. 

The Insulin Cap: Progress, not perfection

Another impactful feature of the Inflation Reduction Act is the new cap on insulin prices. Insulin has a unique backstory in that the original patent in the 1920s was sold for just a dollar, specifically with the intention of saving lives without profiteering. Today, the cost can be so absurdly high that many people with type 1 diabetes ration their insulin because of the cost. More than a dozen people have died from insulin rationing in the past few years.   

Between 2007 and 2020, total out-of-pocket spending on insulin in the United States quadrupled from $236 million to $1.03 billion. Much of the problem can be traced back to monopoly pricing between the three largest insulin manufacturers, Eli Lilly, Sanofi, and Novo Nordisk, who have repeatedly been accused of intentionally driving up the cost of the drug by raising prices in lockstep.

The insulin cap included in the Inflation Reduction Act takes aim at these practices, capping the price at $35 per month. Targeted only for Medicare patients, the privately insured and (more concerningly) the uninsured will be left on their own. It is possible that insurance corporations will compensate for lost profits by raising prices for the privately insured and uninsured. Senior patient advocacy groups are still thrilled with victory, and they should be – pharmaceutical companies blew them out of the water in terms of lobbying funds, but they managed to prevail.

The pharmaceutical industry is, of course, unhappy with this outcome. Again they argue that this will harm innovation and is an overreach of government power, instead pointing the finger at pharmacy benefit managers.  A generic version of insulin is set to hit the market in 2024 and would be priced around $35, which may also add pressure on the pharmaceutical industry to stop price-gouging. 

While the healthcare provisions in the Inflation Reduction Act are not above critique, they are a strong step forwards towards accessible, affordable healthcare and should be counted as a win for patient advocates across the nation. There is potential for this to open the door to more change. The exclusion of private insurance may motivate private insurers to demand the lower prices set for Medicare. Perhaps the population will be louder in its demands for Medicare for All, desperate to also have affordable medication. Leveraging the collective power of the people – in this case, patients – is a part of building a better future. These provisions open the door for future reforms and show that impactful change is possible.