Medicare Will Allow Price Bargaining for a Handful of Drugs

(Bloomberg) -- The Trump administration issued a regulation Thursday that it says will lower drug prices and reduce patient costs by opening up price negotiations for some pharmaceuticals.

  • The regulation allows private insurers that cover about 20 million seniors to bargain over drugs administered in doctor’s offices or hospital outpatient clinics, the section of the program known as Part B. The rule scraps a plan that would have caused companies that raise the cost of certain drugs to lose protections that guarantee Medicare coverage.

Key Insights

  • The rule is one of the most concrete steps the administration has taken yet on drug costs, after President Donald Trump threatened repeatedly to use the government’s buying power to reduce costs.
  • While it may could lower costs, it could also irritate patients. One provision will allow Medicare Advantage plans to use what’s called step therapy: forcing patients to try a cheaper drug first, and only letting them use more costly ones if the treatment doesn’t work.
  • Drugmakers did win one victory: The rule doesn’t include a proposal the Trump administration made last year to limit protections for six protected classes of drugs for illnesses including HIV, depression and cancer.

Know More

  • The provision applying negotiating tools to Part B drugs will save Medicare enrollees $5 million to $8 million a year over 10 years starting in 2020, according to the administration.
  • Drug stocks fell last year after an initial version of the rule was released.
  • Read the full regulation here.

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