Drug Pricing Law: How It Affects Your Medicare Coverage

U.S. President Joe Biden recently signed the Inflation Reduction Act authorizing the government to negotiate prices on some prescription drugs and allow the government to cap the costs of Medicare. With over 63 million Americans receiving Medicare health benefits, the law is likely to affect many people throughout the country, including those living in North Carolina. 

Which drugs are impacted? 

The government has advised that in 2024 they’ll start negotiations to determine what they’ll pay for 10 specific drugs, with the new prices coming into effect in 2026. The government will select the medications from some of the 50 medicines that cause the highest Medicare spending (where there’s not a cheaper generic alternative available). The changes won’t impact new medicines, only drugs that have been available for at least nine years. 

The first group of drugs will be announced next year and is expected to include those medicines predominantly available in pharmacies to treat diseases such as arthritis, diabetes and cancer. 

As part of the announcement, the government also said they’ll negotiate prices on 15 drugs for 2028 and another 20 for 2029. They’ll also expand the range to include drugs administered by doctors and hospitals, including injectables and infusions. 

What drugs aren’t included? 

The government won’t look at generic drugs, including blood pressure medicines. They also won’t be looking at biosimilars, which are less expensive versions of expensive biologic medications. Rare disease drugs, typically some of the most costly drugs, also won’t be included. 

How Medicare members are affected

According to a recent analysis, the long-term changes the government is seeking could see Medicare negotiating the prices of drugs used by around 1 in 7 people, costing Medicare around $25.7 billion each year.

Here are some ways you may be impacted when the changes come into effect: 

• Starting in 2025, if you’re enrolled in Medicare, your out-of-pocket pharmacy drug costs will be capped at $2,000 per year.

• You’ll no longer have co-pays for vaccines.

• Any price increases in prescription drugs will be kept below the inflation rate.

• If you’re enrolled in Medicare Advantage, you may benefit from a cap on increases to premiums of 6% until 2030. 

• The 5% coinsurance payment on drugs will be eliminated, potentially saving you a significant amount each year.

Do drug companies have to comply?

Drug companies that refuse to negotiate prices will have to pay additional tax on sales of up to 95%. In addition, drug companies can choose not to have their drugs covered by Medicare (or Medicaid), although Medicare is currently a significant source of revenue for many pharmaceutical companies. 

Drug companies will face significant penalties if they charge more than the negotiated price. They will also be subject to a penalty fee if they raise prices more than the inflation rate. 

Need help with your prescription drug coverage?

If you have questions about how the drug pricing law changes may impact you, our local health insurance agents are here to help. We specialize in assisting North Carolinians to get the best drug prescription plan for their health needs. Contact one of our health insurance brokers NC today to discuss options for your Medicare prescription drug plans.