“If You Buy In Bulk, You Get A Discount”: Letting Medicare Negotiate Prices Directly Is A Win-Win, Cantwell Says

09.17.24

"If You Buy In Bulk, You Get A Discount": Letting Medicare Negotiate Prices Directly Is A Win-Win, Cantwell Says

Inflation Reduction Act gave the federal government new authority to negotiate with drug manufacturers & cut out-of-pocket costs for patients; First round of negotiations will result in savings for 144k+ WA seniors

WASHINGTON, DC - Today, U.S. Senator Maria Cantwell (D-WA), a senior member of the Senate Finance Committee, questioned witnesses at a committee hearing titled, "Lower Health Care Costs for Americans: Understanding the Benefits of the Inflation Reduction Act." Sen. Cantwell questioned witnesses about why some conservative groups are pushing to roll back a provision of the Act that lets Medicare negotiate drug prices directly with manufacturers, resulting in lower prices for seniors.

"I am so perplexed. I don't get it. I don't get what people don't understand about giving the federal government -- a big purchaser -- the right to negotiate. I'm pretty sure I go to the grocery store every night and it says, here's the price for this, but if you buy three, you get a discount. I'm pretty sure I have a major employer in my state called Costco, and the entire model is that if you buy in bulk, you get a discount. So the only question is, are there people who don't believe that the federal government, who is a major purchaser, should have the right to buy in bulk?" Sen. Cantwell asked. "We just want the federal government to have the same market power that the private sector uses […] Why isn't that good for everyone?"

Dr. Rena Conti, Dean's Research Scholar and Associate Professor of Markets, Public Policy, and Law at Boston University, responded: "It is good for everyone, put simply. Seniors win by paying lower prices at the pharmacy counter, and we expect adherence will increase and better health will follow. In addition, it is good for pharma companies to have the prices lower -- why? More sales."

In August, the Biden Administration announced a list of the first 10 prescription drugs selected for negotiation with drug companies under provisions of the Inflation Reduction Act (IRA). By giving Medicare the power to negotiate with drug companies on the prices they charge for prescription drugs, the IRA saves money for seniors, while saving money for taxpayers and reducing the federal budget deficit.

In 2026, once the new, lower prices take effect, Americans enrolled in Medicare Part D who take these medications are estimated to save $1.5 billion in out-of-pocket costs. If the new, negotiated prices had been in effect during 2023, Medicare would have saved an estimated $6 billion. Moreover, according to the Congressional Budget Office, the drug pricing provisions in the IRA will reduce the federal deficit by $237 billion over 10 years.

Data released by the U.S. Department of Health and Human Services shows in 2022 more than 144,000 Medicare enrollees in the State of Washington needed the 10 drugs announced for price negotiation. Together, those Washingtonians spent about $67.6 million out of pocket to access those important medications in 2022.

Drug		What it Treats	WA Enrollees	Mean Annual Out-of-Pocket Costs in 2022	Discount of Negotiated Price from 2023 List Price
Eliquis		Blood clots	58,000	$568	56%
Jardiance		Type 2 diabetes	26,000	$348	66%
Xarelto		Blood clots	27,000	$555	62%
Januvia		Type 2 diabetes	9,000	$321	79%
Farxiga		Type 2 diabetes	6,000	$346	68%
Entresto		Heart failure	6,000	$449	53%
Enbrel		Arthritis	1,000	$1,341	67%
Imbruvica		Blood cancers	Less than 500	$6,113	38%
Stelara		Crohn's disease	Less than 500	$1,956	66%
Novolog		Diabetes	11,000	$149	76%

The 10 drugs included in this round of negotiations are among the most popular - and expensive - medications taken by people on Medicare. Prices for many of these drugs have soared in recent years, far exceeding the rate of inflation - doubling, tripling, or even more in some cases. For many of the patients taking these drugs, they will need them for the rest of their lives. The savings will only grow over time.

Prices will be negotiated for even more prescription drugs in the future, with the next 15 drugs to be selected for negotiation to be announced by February 2025.

Seniors in Washington state are also saving money on their health care in other ways thanks to money-saving improvements to Medicare in the IRA. For example, in 2024, approximately 288,000 Washington state seniors are saving an average of $240 each year thanks to the IRA's $2,000 cap on out-of-pocket drug costs and broader coverage of important vaccinations. The historic bill also limited Medicare-covered insulin products to $35 per month or less and made recommended preventative vaccines free for Americans covered by Medicare Part D. More details about cost savings associated with the IRA's health care improvements are available HERE.

Sen. Cantwell is a leading voice for reducing prescription drug costs. In addition to her support for the drug negotiation provisions of the Inflation Reduction Act, Sen. Cantwell has pushed for passage of her bipartisan Pharmacy Benefit Manager Transparency Act. Pharmacy Benefit Managers (PBMs) have the power to dictate how much people pay for their prescriptions, how they can access their prescriptions, and even what type of treatments people can receive. Just three PBMs control nearly 80% of the prescription drug market. Sen. Cantwell's legislation would increase drug pricing transparency and hold PBMs accountable for unfair and deceptive practices that drive up prescription drug costs at the expense of consumers.

Video of Sen. Cantwell's remarks in today's hearing is available HERE; a transcript is HERE.

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