Drug Negotiations Not a Slam Dunk for Patients

Leading into the Labor Day holiday weekend, officials in Washington kicked off Medicare's new Drug Price Negotiation Program by naming the first 10 medications to be included. Roughly two-thirds of non-dual eligible Medicare beneficiaries live with multiple chronic conditions. For these patients, many of whom rely on prescription drugs to manage their health, the impacts of the new program could be considerable.

These unprecedented negotiations between the federal government and drug makers, authorized in last year's Inflation Reduction Act, will fundamentally alter Medicare's "Part D" prescription drug benefit – in obvious and not-so-obvious ways.

The Inflation Reduction Act requires officials to select drugs that cost Medicare the most money in total –  even if the medicines don't cost beneficiaries that much out-of-pocket. In other words, the law doesn't necessarily target the priciest medicines; rather, it targets widely prescribed ones.

Spending is a function of both price and volume – or how many drugs are sold because of the number of people using them. That raises the question of how patient access will change in the push to save Medicare money.

The list of 10 drugs includes a blood thinner that costs Medicare $370 per month per patient, and an insulin that costs less than $280 a month. They likely made the list not because they are especially expensive, but because of the large number of Medicare beneficiaries who take them.

The IRA could have ensured continued access to these drugs for Medicare beneficiaries with minimal out-of-pocket costs by prohibiting Part D insurance plans from implementing restrictive coverage policies like non-preferred and specialty formulary tier placement, higher cost-sharing, prior authorization, or step therapy requirements. But it didn't.

That failure could have profound consequences. The alignment of incentives among Medicare itself, insurers and their pharmacy benefit managers, and patients and their doctors has been substantially disrupted.

Neither the IRA nor the Administration's implementation of the law will prevent insurers and PBMs from bumping drugs in the Price Negotiation Program into higher cost-sharing tiers on insurance formularies. That means patients' out-of-pocket expenses for each prescription could skyrocket, even as government costs go down.

Meanwhile, to boost their own profits, insurers and PBMs may adjust their formularies to cover comparable but less popular treatments that are currently just as expensive on lower cost-sharing tiers. That's great for PBM bottom lines. But it will create huge disruptions in access.

Patients with chronic conditions who are succeeding on their current drug regimen may face IRA-induced financial pressure to switch medications, with potentially serious health consequences. That's especially true for patients dealing with two or more chronic conditions, where finding the right combination of medications is a matter of both clinical art and science.

More than half of the people Medicare covers live with three or more different chronic conditions. Shifting away from medications that are working to other possible treatments and combinations is risky and should not be necessary. Yet there's ample reason to think the IRA is setting the stage for just that.

In fact, the Congressional Budget Office (CBO) prepared an estimate projecting changes in utilization rates for a similar drug price negotiation program that preceded the IRA. To achieve expected savings under the program, the score estimated reduced utilization for some medications of more than 25 percent. This disruption to access has no medical justification.

Price negotiations will also have a chilling effect on drug research – and thereby diminish the number of new medicines available to patients in the years and decades to come. One recent study from Vital Transformation estimates that over the next decade, the IRA's drug price negotiations will result in 139 fewer medicines being developed.

With no basis in medical science, the IRA also favors research into medicines administered in a doctor's office over the pills, patches, and capsules people can pick up at a pharmacy and take at home. Many of the most promising cancer treatments fall into the latter category of "small-molecule" drugs –  a clear policy contradiction to President Biden's "Cancer Moonshot" goal to reduce cancer deaths by half in the next 25 years.

The IRA's incentive structure is already steering research dollars away from areas of greatest unmet medical need and preferred routes of administration. And due to the price-popularity nexus in selecting drugs for price negotiations, the IRA actually discourages development of treatments that would benefit Medicare patients in large numbers.

Research into rare diseases will also suffer. The IRA's drug selection provisions disincentivize research that would allow approved rare-disease treatments to be used to treat additional disease states.

Judging the success of the IRA's drug-pricing program requires looking not just at prices, but also at its impact on access to treatments and the far-reaching shifts in research and development decision-making and investment it induces.

This ‘holiday’ announcement is cause not for celebration, but for concern.

Kenneth E. Thorpe is chair of the Department of Health Policy and Management at the Rollins School of Public Health, Emory University. He is also chairman of the Partnership to Fight Chronic Disease.