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Question of the Week — Should Medicare Have More Drug Price Negotiating Power?

Posted  November 29, 2018

This week, the Trump Administration proposed new rules that would allow insurers that participate in Medicare’s prescription drug program-known as Part D plan sponsors-to exclude certain drugs from coverage if their prices rise faster than inflation. The goal of the proposal is to lower prescription drug costs for seniors by giving Medicare insurers more leverage in their negotiations with pharmaceutical companies.

Currently, Part D plans must make certain classes of prescription drugs available to their beneficiaries, regardless of cost. These “protected classes” include certain cancer drugs, antiretrovirals, antidepressants, and post-organ transplant medications. The inclusion requirement gives pharmaceutical companies little incentive to make those protected drugs affordable. According to Administration officials, empowering plans to exclude over-priced protected drugs could save taxpayers hundreds of millions of dollars.

But not everyone is so enthusiastic. In addition to pharmaceutical company pushback, patient advocacy groups have expressed concern that the proposal could limit seniors’ access to needed medications. These groups specifically point to provisions of the proposal that would allow plans to impose prior-authorization and step-therapy requirements for certain drugs. Prior authorization requires physicians to obtain approval from a patient’s insurer before prescribing a drug, while step therapy forces patients to try cheaper drugs before turning to more expensive ones. In a statement, the AIDS Institute called the measures “draconian,” noting that “step therapy is unheard of in the treatment of HIV.”

Should Medicare Part D plans have more price negotiating power—and is this the way to do it?

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