Cut prescription drug prices to achieve Medicare savings


Given the recent surge in pricey prescription drugs, lawmakers are calling for Medicare to offer rebates and negotiate prices to reap significant savings, according to a report released Wednesday by advocacy groups the Medicare Rights Center and Social Security Works.

By significantly reducing the costs of certain drugs--such as the $1,000-per-pill hepatitis C drug Sovaldi--the federal government can secure Medicare savings for the program and its beneficiaries, notes the report.

"We could save money, lower the deficit and not ask seniors to pay more," Rep. Henry Waxman (D-Calif.), a long-standing drug industry critic, told Kaiser Health News. "The only opposition is from drug companies because they will make a little less money if they have someone negotiating prices with them."

Before Medicare prescription drug benefits existed, the federal government benefited from discounts on prescription meds for those covered by both Medicare and Medicaid. Bringing back this discount could lead to $141.2 billion in total Medicare savings over 10 years, according to the report.

While state Medicaid programs and the Veteran's Administration directly negotiate on drug prices, the Medicare program is not allowed to negotiate in the same manner. The program's lack of flexibility prevents the federal government from securing fair prices on Medicare prescription drugs, notes the report. Allowing the Medicare program to negotiate drug prices could significantly cut costs over time--$20 billion over 10 years.

When the Medicare Part D program launched a decade ago, seniors were guaranteed low-cost access to drugs in six broad treatment categories. Yet because of Part D's doughnut hole, beneficiaries become 100 percent responsible for their prescription drug costs once they reach a certain cap--the Affordable Care Act aims to gradually close this gap by 2020. To reduce costs, the report suggests obtaining larger discounts from manufacturers to eliminate the doughnut hole in 2016, rather than in 2020.

To learn more:
- here's the report (.pdf)
- here's the KHN article

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