HEALTH CARE BRIEFING: Employers Fear Deal Could Bump Drug Prices

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Employers that offer health coverage for workers fear Medicare drug price reduction provisions in Democrats’ spending package, the Inflation Reduction Act, would lead to drugmakers shifting bigger price increases onto commercial plans in order to make up for lost revenue.

Employers could face higher health-care costs, and their workers could see increased premiums and out-of-pocket costs, if that happens. That’s on top of missing out on hundreds of billions of dollars in potential savings after the Senate rules arbiter found that private insurers couldn’t benefit from the price caps and rebate provision in the plan.

Under the Senate-passed measure, Medicare would be permitted to negotiate drug prices, starting with 10 high-priced drugs by the middle of this decade and expanding from there. The bill would cap out-of-pocket drug costs for seniors enrolled in Part D at $2,000 per year. The House is expected to vote on it later this week.

Employer groups lobbied unsuccessfully for allowing private plans to get the benefit of drug price negotiation, but they had hoped a provision requiring drug companies to pay Medicare a rebate to the government for drug prices that increase faster than inflation would be applied to private plans as well. But the Senate’s parliamentarian ruled the inflation cap provision for private plans didn’t meet budget requirements necessary to approve the legislation by a simple majority.

“We were deeply disappointed that the inflation rebate calculation did not include the commercial market,” said Ilyse Schuman, senior vice president of health policy for the American Benefits Council, in an interview with Bloomberg Law. The council sent a letter to congressional leaders Aug. 6 opposing the drug pricing provisions of the measure because they excluded commercial markets. Read more from Sara Hansard.

  • Negotiation Provision Explained: Empowering Medicare to negotiate some drug costs is being marketed by Democrats as a landmark change that will lower drug costs for Americans. The Congressional Budget Office has estimated the provisions would save the Centers for Medicare & Medicaid Services roughly $102 billion over a decade. But some drug-pricing experts question whether the bill will actually reduce costs. Celine Castronuovo breaks it down.

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