Allowing Medicare to Negotiate Drug Prices Is A Popular Idea But May Not Produce Substantial Savings

(By – Juliette Cubanski and Tricia Neuman – Kaiser Family Foundation)

After many years of slow growth, prescription drug spending growth is on the rise, raising fiscal concerns for public and private payers and worries about affordability among consumers. The recent increase in drug spending growth is mainly due to spending on new breakthrough treatments for hepatitis C that came to market starting at the end of 2013, along with fewer opportunities to control spending through greater use of generic drugs. For Medicare, which accounted for 29 percent of national retail pharmaceutical spending in 2014¹, per capita costs in the Part D prescription drug program are projected to increase annually by 6.5 percent in the next 10 years, after rising at only 1.5 percent per year over the past eight years.²

In response to higher drug spending growth and heightened attention to drug prices, some policymakers and presidential candidates, including Donald Trump, Hillary Clinton, and Bernie Sanders, are proposing to allow Medicare to negotiate the price of prescription drugs—a proposal supported by 83 percent of the public, including a majority of both democrats (93%) and republicans (74%) (Figure 1).³ The Obama Administration’s recent proposed budget for fiscal year 2017 (and FY 2016) includes a more limited version of this proposal, allowing the Secretary of Health and Human Services (HHS) to negotiate prices for biologics and high-cost prescription drugs for Medicare beneficiaries. Continue reading…

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