Medicare Drug Price Negotiation Will Help Millions of Seniors and Improve Health Equity
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The Inflation Reduction Act features historic reforms to address high prescription drug costs. These include provisions to give Medicare-enrolled older adults better financial protection by limiting out-of-pocket costs for most insulin products to $35 per month as of January 2023, expanding the low-income subsidy for Part D coverage to 150 percent of the federal poverty level in 2024, and setting a new out-of-pocket limit on annual drug spending beginning in 2025. The law also prevents egregious price hikes by forcing drug companies to pay back price increases in excess of inflation.
Notably, the Inflation Reduction Act also allows Medicare to negotiate lower prices for a select number of drugs with the highest Medicare spending, starting with 10 Medicare Part D drugs with negotiated prices set to take effect in 2026. When fully phased in for price applicability year 2029, the Centers for Medicare and Medicaid Services (CMS) will negotiate 20 Part B or D drugs annually. In late June, the CMS released revised guidance clarifying the eligibility criteria for negotiations and formulary inclusion protocol, and the U.S. Department of Health and Human Services (HHS) will publish a list of the 10 drugs subject to the first round of price negotiation by September 2023.
See CAP’s analysis that determined a list of drugs likely to be eligible for the first iteration of negotiation
The Congressional Budget Office estimates that the Inflation Reduction Act’s package of drug pricing provisions would decrease the federal deficit by $237 billion between 2022 and 2031 while reducing out-of-pocket costs for older adults through lower total coinsurance. It also estimates a 50 percent reduction in net prices for negotiated drugs, which will be among those with the greatest aggregate Medicare expenditures. Many of the drugs eligible for the first round of negotiation treat chronic conditions that frequently affect women, Black and Latino people, LGBTQI+ people, and disabled people—many of the same groups that, according to a recent HHS report, have had trouble affording their medication, often rationing drugs and delaying filling prescriptions. In many cases, these inequities in medication access are related to the social determinants of health, discrimination, and stress.
Medicare drug price negotiation will help millions of older adults and disabled people who depend on some of the most cost-prohibitive medications. This column explains how different populations can expect to benefit from lower medication costs through the Inflation Reduction Act drug pricing negotiations based on the disease burdens they commonly face.
Lower drug prices have benefits across populations
Although the drugs up for negotiation are already covered by Part D plans, beneficiaries may still owe coinsurance, copays, and drug deductibles. Because of the financial constraints already facing Black, Latino, women, LGBTQI+, and disabled Medicare enrollees, even small reductions in drug prices, which can lower the amounts beneficiaries owe out of pocket, have a substantial impact on access and affordability. Racial wealth disparities make it more difficult for Black and Hispanic Medicare enrollees to afford their medications: Black and Hispanic Medicare enrollees have median savings that are just 12 percent and 8 percent, respectively, of those of white enrollees. Women enrolled in Medicare have median savings just 72 percent of those of men and spend 13 percent more in out-of-pocket costs. Meanwhile, LGBT individuals are more likely to have low incomes, and disabled people are twice as likely as nondisabled people to live in poverty. Many people who have limited financial means can expect to benefit from lower Medicare drug costs.
Black Medicare enrollees
Black Americans disproportionately struggle to access the medications they need. Compared with their white, non-Latino counterparts, Black non-Latino adults ages 65 and older were 1.5 times more likely to report affordability problems and nearly twice as likely to not get a prescription due to cost.
Many of the drugs likely to be negotiated treat conditions that Black older adults are more likely to have. Black Americans have blood clots, Type 2 diabetes, prostate cancer, overactive bladder, asthma, schizophrenia, irritable bowel syndrome, and chronic heart failure at higher rates than white Americans. Consequently, many Black Medicare enrollees are treating one or more chronic conditions: 45 percent of Black Medicare enrollees have diabetes, nearly 1 in 5 are facing heart failure, and 7 percent have asthma.
Furthermore, disparities in accessing preventive services make Black Americans more likely to have advanced or fatal disease; for example, Black men are twice as likely as white men to die from prostate cancer. Because of the prevalence of these conditions and financial disparities, price negotiations for the medications presented in Table 1 are expected to heavily benefit Black enrollees.
TABLE 1
Latino Medicare enrollees
Latino older adults struggle to access prescription medication at greater rates than white enrollees: Latinos ages 65 and older are 1.6 times more likely to report affordability problems and more than 1.8 times as likely to be unable to get needed prescription drugs due to cost compared with their white peers.
Latino enrollees are also more likely to experience diseases with treatments among those drugs eligible for Medicare negotiation. For example, in 2020, Hispanic adults were 60 percent more likely to have a diabetes diagnosis than non-Hispanic white adults, with 47 percent of Hispanic Medicare enrollees having diabetes. Overactive bladder and schizophrenia diagnoses are also more common among Hispanic populations compared with non-Hispanic white populations, and Latino men are more likely to be diagnosed with a more advanced form of prostate cancer. The medications in Table 2 commonly treat some of the conditions that Latino enrollees frequently experience.
TABLE 2
Female Medicare enrollees
Women constitute more than half of Medicare beneficiaries and approximately two-thirds of Americans ages 85 and older. Yet women struggle to afford medications at higher rates than men and are less likely than men to adhere to medical care due to cost. Gender, income, and wealth disparities also play a significant role in barriers to quality care.
Many of the drugs likely to be negotiated will help women. For example, women are more likely to have breast cancer, overactive bladder, some autoimmune disorders, and irritable bowel syndrome compared with men. In fact, in 2021, 8 percent of female Medicare fee-for-service enrollees had breast cancer—an increase of 3 percentage points over the previous decade. Pregnancy and hormone-related conditions and medications are also important risk factors for blood clots: For example, pregnancy, estrogen-based contraception, and hormone replacement therapy all increase the risk of blood clots. Table 3 shows the medications likely to be negotiated that treat diseases facing many female Medicare enrollees.
TABLE 3
LGBTQI+ Medicare enrollees
Compared with straight/heterosexual and cisgender individuals in California from 2015 to 2017, lesbian/gay, bisexual, and transgender individuals were approximately 50 percent, 115 percent, and 165 percent, respectively, more likely to have delayed or to not get prescription medications in the previous year. These disparities in medication access hold true for older adults: According to the same study, gay, lesbian, and bisexual older adults aged 60 or older were 2.2 times more likely than their heterosexual counterparts to delay or not get prescription medications.
Furthermore, with substantial discrimination and other stressors, LGBTQI+ populations face substantial health disparities. LGBTQ individuals have higher rates of substance use and smoking than their heterosexual counterparts, making drugs that treat asthma, blood clots, and chronic obstructive pulmonary disease particularly important.
LGBT adults are also at higher risk of obesity, schizophrenia, cardiovascular diseases, diabetes, and some cancers. For example, because lesbian women are less likely to have had a live birth, among other factors, they are at an elevated risk of breast cancer. As such, negotiating lower prices for breast cancer drugs such as Ibrance is critical.
Transgender Medicare beneficiaries also have high rates of many chronic conditions treated by drugs likely to be negotiated. In 2015, nearly 30 percent of transgender Medicare beneficiaries had asthma, and more than 1 in 4 transgender Medicare beneficiaries had chronic obstructive pulmonary disease. Additionally, nearly 1 in 3 transgender Medicare beneficiaries had diabetes, and more than 1 in 5 were diagnosed with schizophrenia.
Table 4 includes drugs that target these conditions commonly experienced by LGBTQI+ individuals.
TABLE 4
Disabled Medicare enrollees
Because nearly all the drugs likely to be eligible for the first round of negotiation treat chronic conditions, disabled Medicare enrollees are likely to benefit. In fact, more than 36 percent of Medicare enrollees have four or more chronic conditions. Cardiovascular diseases, diabetes, and arthritis are among the most common chronic conditions for Medicare enrollees.
Some people with disabilities under age 65 are eligible for Medicare, many of whom have low incomes. Compared with older participants, enrollees under 65 dedicate a larger portion of their out-of-pocket costs to covering prescription medications. These enrollees are three times more likely to report fair or poor health and 3.5 times as likely to report medication affordability issues compared with older Medicare beneficiaries.
One example of a group eligible for Medicare before age 65 is individuals with end-stage renal disease who are receiving Social Security Disability Insurance. Several risk factors for end-stage renal disease and common concurrent conditions—namely diabetes, high blood pressure, and heart disease—could be treated with drugs eligible for negotiation. Drugs that treat diabetes, blood clots, and heart failure are among those likely to be negotiated.
Conclusion
Medicare drug price negotiation will help Black and Latino people, women, LGBTQI+ people, disabled people, and others who often have trouble affording medications. Significant potential savings that accompany Medicare negotiations enabled by the Inflation Reduction Act will compound as more drugs are subject to negotiation each year. Medicare enrollees can expect improved access to and affordability of prescription drugs for years to come.
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