Ohio senator says Medicare drug cost negotiations will save money. Others aren't so sure

COLUMBUS, Ohio (WSYX) — "The Inflation Reduction Act is going to mean lower drug costs, lower out-of-pocket costs to literally hundreds of thousands of Ohio seniors."

So declared Sen. Sherrod Brown, D-Ohio, during a press event Wednesday to mark the naming of the first 10 drugs subject to unprecedented price negotiations on behalf of Medicare recipients.

Is it true?

Frankly, nobody knows for sure. It's never been done before. And many questions remain unanswered about what the drug price negotiations will produce.

During a White House celebration Tuesday, President Joe Biden hailed the Inflation Reduction Act — passed last August without a single Republican vote — as "one of the most significant laws ever enacted, especially when it comes to reducing the cost of prescription drugs.

At O'Reilly's Family Pharmacy in Worthington, Ohio Brown recounted how, as a northern Ohio Congressman a couple of decades ago, he used to sponsor bus trips of Lorain County seniors to Windsor, Canada, to get cheaper prescription drugs.

This has been like 20 years in the making. I’ve fought drug companies on pricing essentially my whole career, stood up to the drug companies. They typically win. They have the best lobbyists, the best lawyers, the best advertising budgets," he said.

"But this is a time where consumers win, where Medicare beneficiaries win."

How does the Inflation Reduction Act affect seniors' cost of drugs?

Certainly, some of the provisions in the act hailed by Democrats are indeed money savers:

• Out-of-pocket spending for insulin is limited to $35 a month.
• Medicare now gets rebates from drug companies if their prices rise higher than inflation.
• Patients' cost sharing was eliminated for adult vaccines covered by Medicare.
• Drug spending by Medicare recipients will be capped at $2,000 per year starting in 2025.

However, determining consumer benefits from drug price negotiations is more dicey.

Aimee O'Reilly, whose pharmacy hosted the event featuring Brown, outlined the stakes.

Medicare enrollees taking the 10 drugs covered under Part D selected for negotiations paid a total of $3.4 billion in out-of-pocket costs in 2022 for these 10 medications," she explained. "For many of my patients, these out-of-pocket costs are incredibly burdensome and result in individuals having to choose between their medications and their daily needs.

Kalitha Williams, outreach and advocacy manager at AARP Ohio, added, "For too long, America's seniors have paid the highest prices in the world for prescription works. The number one reason seniors skip or ration their prescriptions is because they can't afford this."

What are the key questions about the feds' plan to dicker over the price of Medicare drugs?

Perhaps the biggest criticisms of the drug negotiations is that the federal government is basing its calculations on the "list price" for drugs — dollar amounts which essentially nobody actually pays.

In actuality, the prices now paid by Medicare recipients were set after negotiations by insurers and pharmacy benefit managers.

Many of the medicines selected for price setting already have significant rebates and discounts due to the robust private market negotiation that occurs in the Part D program today,” said Stephen Ubl, CEO of the drugmakers' trade group, PhRMA.

Adam Fein, author of the widely respected Drug Channels blog, called the use of list prices "bogus" and predicted the Biden administration spin on achieving savings "will be sickening."

So the key question becomes: Can Medicare still find a better bargain -- and thus truly save money for seniors?

Brown says yes: "This is just the beginning. We will negotiate drug prices to bring the cost of those 10 drugs down. We will expand that list in the future.

The Congressional Budget Office forecast Medicare savings of $102 billion in the 10 years after the act took effect. But there was no indication if any of that money would filter down to consumers.

Catherine Owen, a senior vice president and general manager for drugmaker Bristol-Myers Squibb, told STAT, “Right now, there is no requirement as written into the law that any of the savings that the government can afford from these negotiations will be passed on to patients.”

Owen's company (and Pfizer) makes the blood thinner Eliquis, the most popular drug on the list rolled out this week of the first 10 drugs subject to Medicare negotiation.

Eliquis illustrates another problem critics cite with the initial drug list: The idea behind the new Medicare setup is to negotiate prices for drugs that have no competition.

Yet Eliquis will lose its patent protection -- and thus the exclusivity that presumably drives up its price -- in 2028. That's just two years after the federally mandated prices began.

Competitors for another drug on the list, autoimmune disease biologic Stelara, which is used to treat Crohn's disease and psoriatic arthritis, are expected in early 2025. That's a year before the negotiated price would take effect.

How does the Democratic senator know this will work? Because drug companies are fighting it so hard

Inmaculada Hernandez, a pharmaceutical health services researcher and professor at the University of California/San Diego, found that savings might materialize for less than half the drugs that had been anticipated for negotiations.

However, after the list was released, she tweeted that "savings will be passed to patients."

She was responding to a tweet from Stacie Dusetzina, who said, "I don't think it is fair to question whether savings will be passed on to consumers."

Dusetzina, a professor of health policy and cancer research at Vanderbilt University School of Medicine, told WSYX. "Seniors will definitely see savings because of Medicare drug price negotiations.

Even if the process determines the current Medicare price is the best available, that amount still officially becomes the new "list price."

That's a win for seniors because their share of a drug's cost typically is calculated as a percentage of the "list price," she said.

Any time that a patient is paying a deductible or coinsurance, they would benefit from this price reduction," Dusetzina said.

In addition, a planned redesign of Medicare's drug program will smooth out the price jumps that consumers currently face.

"This is why, no matter which drugs are selected, everyone benefits from the negotiation," the professor said.

But Brown doesn't cite research or studies to make his case; he said the legal pushback from pharmaceutical manufacturers and business groups is a sure sign that the drug price negotiations actually will work as intended for seniors.

The reason you know they're going to save a lot of money, that the price will drop significantly, is that the drug companies have already filed more than a dozen lawsuits against the government to stop this from going into effect," the senator said.

Indeed, several of the companies whose drugs are on the Medicare negotiation list — as well as PhRMA — already have sued the Biden administration in various courts across America. The U.S. Chamber of Commerce is seeking a preliminary injunction to halt the price talks.

Unless the Biden administration loses one of those lawsuits, the first round of negotiated prices will made public Sept. 1, 2024, and take effect Jan. 1, 2026. The administration plans to negotiate an additional 15 drugs in 2027, another 15 in 2028, and 20 in 2029.