Searching For Savings In Medicare Drug Price Negotiations

For Medicare, which accounted for 29% of national retail pharmaceutical spending in 2015, average per capita costs in the Part D prescription drug program are projected to increase annually by 5.8% between 2015 and 2025, faster than the 2.4% average annual rate of growth in per capita costs between 2007. This increase will affect both federal spending and beneficiaries’ out-of-pocket costs for prescription drugs.

As such, policymakers have proposed allowing Medicare to negotiate the price of prescription drugs. Under current law, the Secretary of the Department of Health and Human Services (HHS) is explicitly prohibited from negotiating directly with drug manufacturers on behalf of Medicare Part D enrollees.

Some proposals to allow Medicare to negotiate drug prices would strike the Medicare Modernization Act of 2003 “noninterference” clause all together, while other proposals would establish a public Part D plan to operate alongside private Part D plans and administered by HHS. A more middle ground approach, would authorize the HHS to negotiate prices solely for a limited set of relatively expensive drugs, including unique drugs that lack therapeutic alternatives.

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