For more than a decade, Medicare Part D has successfully provided seniors access to comprehensive prescription drug coverage with low and stable premiums, while negotiation within its unique market-based structure has kept overall program costs far below initial projections. However, the program could work even better and be made fairer by improving affordability for seniors who are increasingly facing high out-of-pocket costs at the pharmacy counter. As we look to make changes to Part D, we need to make sure the program fulfills its promise to seniors.
When Part D was enacted, it included a provision called “the noninterference clause” which prohibits the Secretary of Health and Human Services (HHS) from interfering in the private, ongoing and successful negotiations between Part D plans, drug manufacturers and pharmacies in the program. It also prevents the Secretary from establishing a single, restrictive formulary for the program. This structure has ensured that seniors can access the medicines they need based on what their doctor prescribes. This structure has also kept costs down, while ensuring the success and stability of the Part D program overall. But recently, a number of bills have been introduced that would jeopardize this success by repealing the noninterference clause.
Allowing the Secretary to interfere in the existing private negotiations under the guise of lowering prices might make for a good soundbite, but the only way that happens is by limiting access for seniors. In fact, multiple heads of the CBO have repeatedly said that the HHS Secretary would not be able to secure lower prices than are already achieved through current negotiation without restricting access to medicines for the beneficiaries who rely on them. This includes Peter Orzag, in a letter to Congress, stating that “giving the Secretary broad authority to negotiate drug prices would not provide the leverage necessary to generate lower prices…and thus would have a negligible effect on Medicare drug spending.” HHS Secretary Alex Azar recently referenced that statement when asked by PBS News Hour about his thoughts on such changes to Part D. He said: “We have negotiation…Peter Orzag, the Democratic head of the CBO and OMB [under President Obama], has made clear that you wouldn’t get in the Medicare Part D drug program, better discounts than we currently get unless you set a single, national, restrictive formulary.”
Further, these legislative proposals also ignore the fact that there is already substantial negotiation in Part D between plans and manufacturers. These help keep net drug costs low. In fact, across twelve therapy classes widely used in Part D, negotiation results in an average rebate of 35 percent. Furthermore, in the first 10 years of the Part D program, costs came in $349 billion under budget as a result of the existing competitive marketplace.
Interfering in these existing Part D negotiations would undermine the program and would only achieve savings by setting up a national formulary that would have the government decide which medicines seniors have access to, rather than their doctor.
However, updates to Part D can make sure the negotiations that already take place in Part D benefit patients through discounts at the point-of-sale. Such a policy would lead to lower costs for patients taking many different medicines.
We should be working to make sure our seniors have the health care they need at a cost they can afford. Which is why any changes to the Part D program need to be done the right way: by improving affordability and predictability for seniors who are increasingly facing rising out-of-pocket costs and ever-fluctuating costs at the pharmacy counter. Repealing the noninterference clause does none of that, and instead threatens to limit access to medicines, reduce choice and restrict coverage for more than 43 million seniors that rely on it.
Tom Wilbur is Director of Public Affairs at PhRMA focusing on federal advocacy priorities including Medicare and intellectual property. Prior to joining PhRMA, Tom worked in politics and on Capitol Hill, most recently responsible for communications and strategy for U.S. Rep. Fred Upton and the House Energy and Commerce Committee. Tom is a proud Michigander and outside of the office enjoys reading, running, hiking, golfing, live music, and spending time with family and friends.
Topics: Part D