Drug-Price Relief for Enrollees

Congress in August passed a law designed to help millions of older Americans better afford the medicines they need.

The new drug-price rules are just one component of the Inflation Reduction Act of 2022.

It will take time for all elements of the law to take effect. In 2023, the Human and Health Services secretary will become authorized to negotiate Medicare drug prices, with the negotiated prices going into effect in 2026. The first year of the plan, ten drugs will qualify for price negotiation, and by the decade’s end 20 drugs will have negotiated prices.

None of the high-cost drugs involved have been selected yet.

Another major part of the law is that, starting in 2025, Medicare Part D participants will have their out-of-pocket prescription costs capped at $2,000 a year. (The out-of-pocket limit before Medicare starts full coverage of drugs is now $7,050.)

Once January rolls around, if the price of a Part D prescription drug is raised more than the rate of inflation, the drugmaker will have to rebate Medicare the portion of the increase that exceeds the inflation rate.

Then there’s insulin.

Most of the 3.3 million Medicare beneficiaries with diabetes will have their co-payments for insulin capped at $35 a month starting in 2023. This is a major triumph for consumers.

Granted, the bill originally meant to provide this relief to all diabetics, but Republican opposition (it was largely a party-line vote) in Congress led to limiting this relief to Medicare enrollees.

Even so, some insulin users on Medicare will fall through the cracks. The legislation applies only to injected insulin. Those who take their insulin via a pump – even

though the insulin itself is exactly the same – will not see any benefit from this legislation. That’s bureaucracy for you.

Some naysayers argue that insurers will simply raise premiums to compensate for the insulin cap. But now that it’s the insurance firm, not the patient, stuck with paying the drugmakers, I predict insurers will better negotiate insulin prices with manufacturers. Here in the U.S., drugmakers charge tons more beyond a tidy profit, because our insurance structure lets them get away with it.

One common variety of insulin is Humalog. A vial of it sold for $35 back in 2001, but by 2015 the price had gone up sevenfold, to $234.

In 2018, the typical American insulin user spent $3,490 for insulin. That same year, the average Canadian user spent $725.

U.S. manufacturers charge much more solely because they can.

Alas, the American system is typified by Martin Shkreli, who once raised prices astronomically on drugs for which there was no competition. He claimed it didn’t matter how much he charged, because no consumer paid that much.

Shkreli was dead wrong. Many folks pay on their own for the full cost of a drug. Either the drug is not covered by an insurance plan, or no coverage kicks in until a mega-thousand-dollar deductible is reached, or the person lacks insurance.

I still have a receipt from a Claremont pharmacy from 12 years ago, when our private insurance did not cover a certain drug. We forked over $478.09 for a one-month supply. (That spurred us to start buying from Canada for price relief; a year later, a generic version of the drug was approved and became affordable here.)

Shkreli’s company did not make or sell insulin. But his opportunistic mind-set permeates the industry.

Shkreli was released from prison this year – for insider-trading crimes, not for his pharmaceutical price-gouging, which remains legal.

That’s why this legislation is needed.