Competition in Medicare Will Reduce Drug Prices for Seniors

Today, the Medicare program is broken up into four parts: Part A for hospital-based care; Part B for care in physicians’ offices; Part C as a privately-administered alternative that integrates Parts A & B; and Part D for prescription drugs purchased through retail pharmacies like CVS or Walgreens. It’s no wonder that this highly fragmented program with an outdated design leads to higher prescription drug prices for seniors.

Take a senior with multiple sclerosis. That individual could in theory receive MS treatments through each and every Medicare program, without any coordination between them, and without any thought as to which drug offered the best value to the patient.

FREOPP’s comprehensive white paper on reducing prescription drug prices includes a proposal to address this problem: “to migrate all prescription drug coverage to Medicare Part D, where pharmacy benefit managers negotiate drug prices on behalf of the Medicare program.” U.S. Health and Human Services Secretary Alex Azar agrees, and included a version of the idea in his own plan, “American Patients First.”

The Department of Health and Human Services has now unveiled the details of a new rule, which will allow private insurers who run Medicare Part C (or “Medicare Advantage”) plans to coordinate with their Part D counterparts in order to help seniors obtain the least-costly, most-effective therapies available. I write about it in my latest piece for Forbes:

Under the new rule, seniors enrolled in Medicare Advantage plans (Part C) who have also signed up for prescription drug coverage under Part D will now be able to benefit from competition among a broader range of medicines.

The new rule allows Medicare Advantage plans to use “step therapy” under which seniors might start with an oral drug paid for by Part D, if it’s of equal clinical value but lower cost, and then step to a more expensive injectable drug if the first medicine fails to work. Insurers would be required to return at least half of the savings to seniors, possibly in the form of those Visa gift cards often sold in grocery stores and pharmacies.

This is a win-win for seniors and taxpayers. First off, seniors will benefit from more competition in the form of hard cash and lower insurance premiums. And lower average selling prices for Medicare Part B drugs will create savings for the entire Medicare program, while especially enhancing the value that Medicare Advantage plans can deliver for seniors.

More here.