Lipstick on a Pig

Blog#126-8/11/22

LIPSTICK ON A PIG
By Richard Davis

The legislation just passed by the Senate, the Inflation Reduction Act, has been sold by Democrats as something that will save seniors a lot of money for prescription drugs. They are all puffed up about how the Medicare program will finally be able to negotiate drug prices with pharmaceutical manufacturers. It is too little too late and worse than putting lipstick on a pig.

Forty nine million Medicare beneficiaries have bought into the flawed Medicare D program that provides coverage for prescription drugs. The program was created to support the drug and insurance industries. Medicare is only a middleman because enrollees have to pay premiums to insurance companies just for the privilege of being able to buy drugs at outrageous prices.

If someone does not sign up for the program as they initially enroll in Medicare they are forced to pay a penalty. There are many other punitive aspects to the program but, for some people who take more than five or six medications daily, it may save them a little money.

In order to figure out if it is worth it for a person to enroll in Medicare Part D they have to navigate a complex web site and then compare all of the available plans selling the drugs they take. It can be a daunting experience and usually requires help from people who are experienced Part D navigators.

I have made an effort at reading some of the Inflation Reduction Act language that relates to the Medicare drug program. The bill creates a mechanism for Medicare to negotiate drug prices with pharmaceutical manufacturers. This is certainly a good thing, but as you read the details it is obvious that the process will be so convoluted that few people will be able to figure out how it works and how to implement it.

One section describes details that relate to rebatable drugs. Here is the language: “‘(F) PART B REBATABLE DRUGS.—In the 13 case of a part B rebatable drug (as defined in 14 paragraph (2) of section 1847A(i), except if 15 such drug does not have a copayment amount 16 as a result of application of subparagraph (E)) 17 for which payment under this part is not packaged into a payment for a covered OPD service 19 (or group of services) furnished on or after 20 April 1, 2023, and the payment for such drug 21 under this subsection is the same as the 22 amount for a calendar quarter under paragraph 23 (3)(A)(ii)(I) of section 1847A(i), under the system under this subsection, in lieu of calculation 25 of the copayment amount and the amount of 142 ERN22335 9K1 S.L.C. 1 payment otherwise applicable under this sub2 section (other than the application of the limitation described in subparagraph (C))”

Most of the bill that deals with drug price negotiation reads like this paragraph. People enrolled in Medicare Part D want to know what this bill means for them. After sorting through all of the dense legalese and convoluted language the takeaway is that in 2025 Part D enrollees will not have to pay more than $2000 a year for their prescription medications. That may be good for some people if they take a lot of medications and possible irrelevant for millions of people who come close to that threshold.

Here is a summary of the health care part of the Inflation Reduction Act from The Hill web site: “The bill would allow Medicare to negotiate prices for some drugs for the first time, a policy Democrats have been trying to enact for years over the fierce objections of the pharmaceutical industry. The provisions save more than $200 billion over 10 years.

• It would allow Medicare to negotiate lower prices for 10 high-cost drugs beginning in 2026, ramping up to 20 drugs by 2029. There is a steep penalty if a drug company doesn’t come to the table: a tax of up to 95 percent of the sales of the drug. There is also a ceiling that the negotiated price cannot rise above.
• In a deal with moderates including Sen. Kyrsten Sinema (D-Ariz.), only older drugs are subject to negotiation after a period of nine years for most drugs and 13 years for more complex “biologic” drugs. That means the negotiations are more limited than many Democrats wanted.

Drug costs can be capped but largely only for Medicare.

The bill includes other measures to cap drug costs. The provisions still largely apply only to seniors on Medicare, not the millions of people who get health insurance through their jobs, in part because complex Senate rules limited how expansive the provisions would be.

• If drug companies raise prices in Medicare faster than the rate of inflation, they must pay rebates back to the government for the difference.
• Democrats tried to apply this provision to the private market, but the parliamentarian ruled it violated the Senate rules used to bypass a GOP filibuster.
• In one of the most tangible provisions for patients, the bill caps out-of-pocket drug costs at $2,000 a year for seniors on Medicare, starting in 2025.
• The bill also caps patients’ insulin costs at $35 a month, but only for seniors on Medicare. Republicans voted against overruling the Senate parliamentarian to extend that protection to patients with private insurance.”

According to the Washington Post the main pharmaceutical lobby, PhRMA, and its allies spent at least $18.6 million on television and digital ads since July 1, including $1 million on new television ads just since the Democrats’ deal was announced July 27. No doubt there are many concessions to them in the bill. As far as I can tell pharmaceutical manufacturers are not required to negotiate with Medicare and when they do I suspect the cost cutting will be minimal considering that big pharma will continue to pour their usual millions of dollars into the war chest of powerful politicians.