A Brief Reminder: Medicare 'Negotiations' Alone Don't Really Save Money for Seniors

It’s Beanpot championship day, sportsfans. Go Terriers.

Welcome to Day Two of Trump 2.0. This is probably a good time to expound on how I’m going to approach news coming out of the White House. The goal is to put a fairly aggressive filter on the outrage of the day and separate the policy (important!) from the politics (worth ignoring!). 

Yesterday provided a case in point. Trump withdrew a 2022 executive order on drug prices. It was a meaningless gesture. The executive order directed the CMS Innovation Center to release a report on ways that the agency is addressing drug costs. Which it did. ** 

So it’s not clear that the order was in any sense operative or was anything other than a symbolic middle finger from one administration to the next. 

** The report detailed three pilots that CMMI was going to launch: $2 generics, a cell and gene therapy access model, and some data-gathering on using Medicare Part B reimbursement to incentivize completion of confirmatory trials for drugs approved under accelerated approval. 

Other than (maybe) the last one of those, I’m not aware that any of the three policies are particularly political or controversial. And I didn’t see anything that suggested that Trump would walk away from the actual policies. So I’ll be watching CMMI on this … not the White House.

One of my biggest pet peeves around the Medicare “negotiations” is the idea that imposing a low, government-set price of medicines is going to deliver lower prices to seniors. 

That’s not remotely how it works. Most seniors are not going to see any benefit here, and some may actually see out-of-pockets rise for exceedingly technical reasons associated with the Part D benefit design. No one struggling with medicine prices is going to magically benefit from “negotiated” prices. 

And yet there was a lot of chatter last week around the announcement of the next 15 meds in line for price control suggesting that — sure! — there will indeed be magic benefits for seniors.

Here is now-former HHS Secretary Xavier Becerra in the Washington Post: 

The same piece had this from AARP’s Leigh Purvis: 

And here is a bit from Joe Biden’s statement: 

I’m not being entirely fair here by looking at the “negotiation” provisions in isolation. Policy wonks will argue that price controls do benefit patients, they just do it indirectly by creating the cost savings that make the $2,000 out-of-pocket cap possible. 

And that’s not wrong. But there’s nothing that says that the $2,000 cap can’t exist without negotiations. There are a million ways that benefit could have been funded. Higher corporate taxes. Fewer Joint Strike Fighters. Whatever. You get the idea. 

I’m not arguing that the current system is somehow illegitimate. But I do think that we’re setting seniors up for disappointment by continually talking about how negotiations -- alone -- are going to drive down out-of-pocket spending. 

• Paragon Health’s Theo Merkel is going to take a role in the Trump White House as a special advisor, per Politico. Merkel testified last year before the Senate Finance Committee, and his testimony there is probably required reading. (Sorry about the overuse of “this is a must-read” phrasing over the past few months. There’s just a lot of great stuff!)

• This isn’t a must-read, but it is a must-listen: Stacey Richter’s latest Relentless Health Value podcast featured Chris Crawford from RxSaveCard. Crawford outlined how employers can get access to lower GLP-1 prices while still working to control access: just give employees money they can use to buy the medicines from cash-pay pharmacies, where prices can be lower than negotiated net prices. It’s not hard to see how we pivot from here to a system where PBMs are slowly disintermediated.

• What will Trump mean for pharma? Nobody knows. WSJ’s always-excellent David Wainer tried to guess, but he can’t really tell if the industry’s wary enthusiasm for the new administration is “wishful thinking” or just a reaction to the reality that “it is hard to imagine an administration more challenging than Biden’s.”

Cost Curve is produced by Reid Strategic, a consultancy that helps companies and organizations in life sciences communicate more clearly and more loudly about issues of value, access, and pricing. We offer a range of services, from strategic planning to tactical execution, designed to shatter the complexity that hampers constructive conversations. 

To learn more about how Reid Strategic can help you, email Brian Reid at [email protected].