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September 5, 2023
This week CMS took a significant step to try to reduce drug spending. They announced the 10 drugs that they will negotiate the drug price with the manufacturers. I don’t want to get too political on this topic, but I wanted to share our thoughts on this topic:
1. FINALLY, the government is doing something. They have had numerous hearings about the topic, but little action. At least this is something.
2. This applies only to Medicare patients. Given only 18.4% of the US population is enrolled in Medicare, the remaining 81.6% of us will not be helped by these negotiations. FPS is concerned that the reduction in cost seen by Medicare for these products will be shifted to the employer sponsored health plans. We saw this when Medicare closed the donut hole in the Medicare Part D plan. Gradually, drug manufacturers increased their costs to cover the expense they incurred by covering 50% of the Medicare beneficiaries’ costs in the donut hole.
3. The price reductions will not be effective until 2026. Majority of the drugs on this list will either have their FDA Exclusivity expired by time the price reductions are effective, but because of our flawed patent system, the generic will not be available until much later. The problem is our current Patent System. Drug Manufacturers are using the patent system to extend the exclusivity period to the detriment of our healthcare system.
Although this is a great start, the government needs to take a hard look at the Patent system and how we incentivize generics to come to market. If these two items were addressed, there wouldn’t be a reason for Medicare to negotiate with drug manufacturers. Employers need to EXPECT MORE from their government.
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