Medicare could have saved almost $80 billion, just in 2018, by matching the U.K.’s prices for prescription drugs that don’t have any competition, according to a new study released in Health Affairs yesterday.
Why it matters: Medicare’s drug benefit was designed to keep prices in check through competition. But competition doesn’t always exist, and the U.S. doesn’t have many options to keep prices down in those cases.
- Unlike the other three countries examined in the study, the U.S. doesn’t regulate drug prices.
Details: This study focuses on a group of single-source brand-name drugs in Medicare Part D that have been on the market for at least 3 years. Researchers compared U.S. prices for those drugs to prices in the U.K., Japan and Ontario.
- On average, after accounting for rebates, Medicare paid 3.6 times more than the U.K., 3.2 times more than Japan, and 4.1 times more than Ontario.
- The longer a drug was on the U.S. market, the larger that gap grew.
- If Medicare Part D had adopted the average price from those countries, it would have saved an estimated $72.9 billion on sole-source drugs in 2018 alone.
Between the lines: The Trump administration wants to rely on international prices for Medicare Part B, which covers drugs administered in a doctor’s office. But this study shows that there are also a lot of savings to be had in Medicare Part D, which covers drugs you pick up at a pharmacy.
The other side: “An international reference pricing system could result in American seniors losing access to their choice of medicine, and waiting years longer for new breakthrough treatments,” the trade group PhRMA said in a statement.
The bottom line: The political interest in cutting drug prices is real, but we’re still a very long way from President Trump’s stated goal of matching other countries’ prices.
The 3 big health insurers that control a majority of Medicare’s prescription drug coverage — CVS Health, Humana and UnitedHealth Group — are arguably the most at risk from the Trump administration’s plan to eliminate rebates within Medicare.
The big picture: These companies rely heavily on rebates to offset the costs of covering seniors’ prescriptions. Losing those rebates would shift billions of dollars away from them, and they could lose customers if they raise premiums to make up the difference.
The only plausible explanation for President Trump’s renewed effort through the courts to do away with the Affordable Care Act, other than muscle memory, is a desire to play to his base despite widely reported misgivings in his own administration and among Republicans in Congress.
Reality check: But the Republican base has more complicated views about the ACA than the activists who show up at rallies and cheer when the president talks about repealing the law. The polling is clear: Republicans don’t like the ACA, but just like everyone else, they like its benefits and will not want to lose them.
Now that a Texas judge has ruled that the entire Affordable Care Act is unconstitutional — all because of its individual mandate — Republicans may find themselves wishing for a different outcome.
The big picture: There is little hope of a deal with Democrats on health reform in a divided Congress if the decision is upheld. Democrats will now use the 2020 campaign to paint Republicans as threatening a host of popular provisions in the ACA. And here’s the kicker: protections for pre-existing conditions, the provision that played such a big role in the midterms, is not even the most popular one.
Many studies have demonstrated what economics theory tells us must be true: When consumers have to pay more for their prescriptions, they take fewer drugs. That can be a big problem. This is Healthcare Triage News.