Standing next to President Biden at a campaign event last month, Democratic nominee for President, Kamala Harris, celebrated the newly announced price reductions for the first ten prescription medications Medicare negotiated under a provision contained in the Inflation Reduction Act. Harris said she is “proud to have cast the tie-breaking vote that gave Medicare the power to negotiate” drug prices. And now she has reaffirmed her commitment to extend applicability of parts of the law to the commercial insurance sector and build on the Medicare negotiation policy to include more drugs if she becomes President. However, she wouldn’t be able to accomplish these goals on her own. She would need Congressional support.
The Department of Health and Human Services last month announced lower prices—so-called maximum fair prices—Medicare had negotiated with drug makers for the first ten drugs it selected in 2023 under the IRA’s drug price negotiation program. These outpatient medications are popular, top-selling drugs, also among seniors and disabled folks. They are used to treat conditions such as heart disease, diabetes and cancer. The new prices will go into effect on January 1, 2026. Once these prices are implemented, Medicare beneficiaries are expected to save in aggregate $1.5 billion in out-of-pocket costs on pharmaceuticals.
The next batch of 15 outpatient prescription medicines will be chosen by the Centers for Medicare and Medicaid Services in February 2025; their MFPs will be applied in 2027. And the following round will include a total of 15 outpatient and physician-administered medications, to be selected in February 2026 with MFPs applied in 2028. Beginning in 2027, the tally of drugs chosen—a mix of outpatient and physician-administered medications—could reach 20 annually if sufficient numbers meet the selection criteria.
Another main IRA provision designed to lower the out-of-pocket cost burden for Medicare beneficiaries is a wholesale restructuring of the outpatient pharmacy benefit called Part D, which already capped recipient annual out-of-pocket expenses at $3,300 in 2024 and will further decrease the cap to $2,000 in 2025. At the same time, Part D redesign will shift the cost liability for high-cost beneficiaries away from the federal government and towards plans that manage the pharmacy benefit and manufacturers of specialty pharmaceuticals.
Other key measures implemented under the IRA include a $35 cap per month on out-of-pocket costs for insulin products for all Medicare beneficiaries. This went into effect in 2023. And the law provides for free vaccines for seniors and the disabled starting in 2024.
Looking ahead, Harris has vowed on the campaign trail to extend to the commercial insurance sector the out-of-pocket cost cap of $2,000 for outpatient drugs and the insulin out-of-pocket cost maximum of $35 per month.
Harris also wants to expand the scope of Medicare drug price negotiations, in line with what the White House outlined earlier this year when it sought to substantially increase the number of drugs subject to Medicare price negotiations to 50 a year, up from 20, starting in 2028. The budgetary plan issued by the White House would build on the IRA, which currently enables Medicare to negotiate prices for as many as 140 cumulatively by 2033. The proposal would potentially more than double those totals, to up to 300 by 2033.
Increasing the numbers of drugs eligible for price negotiation would be achieved by allowing Medicare’s selection of medicines to take place sooner, namely, as quickly as five years after drugs’ approval by the Food and Drug Administration. Small molecule drugs are currently exempt from selection for negotiation for seven years following approval, while biologic or large molecule pharmaceuticals have an exclusivity period of 11 years.
Both the extension of certain out-of-pocket cap provisions to the commercial sector and the expansion of Medicare drug price negotiations would require Congressional support. They can’t be done under the existing authority granted by the IRA. Harris would need Congress to either pass an amendment to the law or create a separate piece of legislation.
The likelihood of Congressional action depends of course on the election results in the House and Senate. And even if Democrats were to win a (slight) majority in the House and maintain their razor-thin edge in the Senate it’s not at all clear that there would be sufficient political backing for the kinds of changes that Harris has called for to the IRA.
As a reminder of just how difficult passage was of the IRA as presently constituted, a small group of moderate House Democrats voiced concerns in 2021 about allowing Medicare to negotiate drug prices. In a previous iteration of the IRA called Build Back Better, they voted against such negotiations that would include a total of up to 250 medications through 2032. Eventually a compromise was reached in which in aggregate at most 140 would be subject to negotiation.
So while Harris campaigns on certain achievements of the current Administration, particularly around reducing the out-of-pocket cost burden for Medicare beneficiaries, even if elected her quest for expansion of IRA drug pricing measures could hit roadblocks in Congress.
