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Making medicines more affordable: Modernizing Medicare

Emilie Signora
Emilie Signora November 11, 2021

Making medicines more affordable: Modernizing Medicare.

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Common-sense reforms can help ensure everyone benefits from America’s engine of innovation and receives the care they need and deserve. In this series, we’re taking a closer look at PhRMA’s advocacy efforts to make medicines more affordable, part of our patient-centered agenda which aims to lower barriers between our industry’s medical innovations and patients who need them. 

When policymakers look to make changes to the Medicare program, they should focus on policies that address the concerns many seniors and people with disabilities have raised regarding lowering out-of-pocket costs and removing barriers to care. 

Yet the current debate in Washington misses the mark by focusing on government price-setting policies that would do more harm than good. Allowing the government to set the prices of medicines would hinder innovation and patient access without fixing systemic issues in our health care system. We can modernize Medicare without putting innovation and access to medicines in jeopardy, as outlined in our patient-centered agenda, Building a Better Health Care System

Instituting a market-based adjustment in Part B can help modernize Medicare. Medicare Part B covers medicines that are usually administered by a physician (like many injections and infusions) and a wide range of health care services, including physician office visits, hospital outpatient care and medical equipment. While Part B has worked well to provide seniors and people with disabilities with the care they need, many on Medicare Part B could further benefit from the lower prices negotiated by large commercial purchasers in the private insurance market.  

  • Under this approach, manufacturers would provide a price concession to Medicare, called a “market-based adjustment,” for prices that fall below the average sales price (ASP). This reform would achieve savings for the government and people on Medicare while protecting access to medicines and provider reimbursement.
  • Seniors and people with disabilities on Medicare Part B who do not have supplemental insurance, roughly 10% of all Part B beneficiaries, could benefit from significantly lower out-of-pocket costs by hundreds or even thousands of dollars a year.
We support policies that improve affordability and predictability for seniors and people with disabilities on Medicare Part D who face high out-of-pocket costs. Medicare Part D provides seniors and people with disabilities with coverage for prescription medicines picked up at retail pharmacies or ordered through mail order or specialty pharmacies. In its first 15 years, Part D contributed to decreased mortality rates, reduced hospitalizations and improved adherence to medicines for seniors and others enrolled in the program – Medicare Part D could work better and be made fairer by improving affordability and predictability for beneficiaries who face high out-of-pocket costs for their medicines. Improvements to Part D must be done the right way, with targeted and measured reforms as discussed below: 
  • Capping annual out-of-pocket costs. Most patients with commercial insurance already benefit from an annual limit on out-of-pocket costs, but this is not the case for seniors and those with disabilities in Part D. We need to cap annual out-of-pocket costs in Part D. 
  • Lowering cost sharing and making it more predictable. We should lower the amount of cost sharing seniors and people with disabilities have to pay in Part D and spread their cost sharing more evenly throughout the year to give more predictability and peace of mind about what patients will pay each month at the pharmacy. 
  • Sharing savings at the pharmacy counter. The rebates and discounts pharmaceutical manufacturers negotiate with pharmacy benefit managers (PBMs) and Part D health insurance plans often are not used to directly lower beneficiary out-of-pocket costs. We must ensure these savings are passed on to seniors and people with disabilities at the pharmacy.
These commonsense solutions can help improve access and affordability for seniors and people with disabilities without hindering innovation and patient access to care. Learn more about how we can Modernize Medicare by visitingPhRMA.org/BetterWay.  

Topics: Part D, Medicare, Part B, Proactive Agenda