The rising prices of existing and new brand prescription drugs could have serious consequences for tax payers and the 44 million seniors who rely on Medicare. In order to rein in those costs, it’s vital for the Administration to encourage the use of generic drugs and biosimilars.
While Congress has been grabbing the headlines by holding numerous hearings and introducing various legislative proposals aimed at lowering drug prices, the Trump Administration has introduced some consumer-friendly changes to Medicare that should change the way drugs are priced for seniors and encourage the use of generics and biosimilars. First, the Centers for Medicare & Medicaid Services (“CMS”) proposes to change how insurance plans and PBMs conduct drug utilization management and structure drug formularies. Second, the U.S. Department of Health and Human Services (“HHS”) proposes to eliminate the rebates that pharmacy benefit managers (“PBMs”) receive from drug manufacturers and to encourage that any rebates go directly to seniors at the point of sale.
These significant reforms are necessary as the stakes are high. Since 2006, Medicare Part D spending has more than doubled to roughly $100 billion per year in 2017, and it is expected to climb as a growing and aging population of baby boomers becomes Medicare eligible. Today, despite making up a modest proportion of Part D prescriptions, brand drugs account for some 84% of total Part D spending. Generics, meanwhile, which make up most of the Part D prescriptions, account for only 16% of the total spending and saved the Part D program approximately $82 billion in 2017.