Biden Said Medicare Drug Price Negotiations Cut the Deficit by $160B. That’s Years Away.

We reduce the federal deficit by $160 billion as a result of Medicare will not should pay these exorbitant costs to Large Pharma.

President Joe Biden in his State of the Union tackle, March 7, 2024

President Joe Biden has been making his case for reelection to voters by telling them he’s good for his or her pocketbooks, together with on the pharmacy counter.

Throughout his State of the Union tackle, Biden stated laws he signed gave Medicare the ability to barter decrease prescription drug costs.

“That’s not simply saving seniors cash and taxpayers cash,” Biden stated, a reference to the Inflation Discount Act, which handed in 2022. “We reduce the federal deficit by $160 billion as a result of Medicare will not should pay these exorbitant costs to Large Pharma.” 

Biden added, “This yr, Medicare is negotiating decrease costs for a few of the costliest medicine.” He referred to as for giving Medicare the ability to barter costs for 500 medicine over the subsequent decade.

In August, the federal authorities introduced the primary 10 medicine that it’s going to negotiate for decrease costs as a part of the Inflation Discount Act. A revered supply of laws evaluation initiatives the change will save the federal government some huge cash, however these {dollars} haven’t been realized.

There’s a motive Biden touted this laws throughout his tackle: Polling by KFF exhibits that individuals, no matter their political leanings, overwhelmingly help the thought of permitting Medicare to barter drug costs. However most individuals don’t know that such negotiations are underway.

Affect of Inflation Discount Act Will Take Many Years

In August 2022, Biden signed the Inflation Discount Act, which is able to permit the federal authorities to barter costs with drugmakers for Medicare. Biden saved his promise to repeal the regulation that barred Medicare from negotiating costs. 

The nonpartisan Congressional Price range Workplace initiatives a 10-year cumulative financial savings of $161.7 billion from two provisions of the Iaw: a phased-in effort to barter with drugmakers for decrease costs and a rebate for worth will increase above the general inflation price. (The White Home has beforehand pointed to this evaluation.)

Nevertheless, not all of the financial savings shall be everlasting. About $44.3 billion over 10 years shall be funneled into associated provisions that develop entry and decrease out-of-pocket prices for Medicare beneficiaries.

“Negotiations are nonetheless ramping up, so the financial savings generated by the Inflation Discount Act negotiation provisions are nonetheless sooner or later,” stated Matthew Fiedler, a Brookings Establishment professional on the economic system and well being research. “The Congressional Price range Workplace did count on the inflation rebate provisions of the IRA (that are encompassed within the $160 billion) to start producing modest financial savings throughout 2023 and 2024, however there, too, many of the financial savings are sooner or later.”

The laws includes worth negotiations for 10 brand-name medicines that lack generic equivalents. These medicine embody the blood thinners Eliquis and Xarelto; the diabetes medicine Januvia, Jardiance, and NovoLog; Enbrel, for rheumatoid arthritis; the blood-cancer drug Imbruvica; Entresto, for coronary heart failure; Stelara, for psoriasis and Crohn’s illness; and Farxiga, a drug for diabetes, coronary heart failure, and power kidney illness.

The CBO has estimated that the negotiated costs will translate to almost $100 billion in federal financial savings from 2026 to 2031.

“Biden is leaping the gun on claiming financial savings for seniors,” stated Joe Antos, an professional on well being care on the conservative American Enterprise Institute. “Worth negotiations haven’t been accomplished; the brand new costs for chosen medicine aren’t in place till 2026.”

Biden stated the laws is “saving seniors cash and taxpayers cash,” which could possibly be interpreted to imply it’s saving them cash now on pharmaceuticals. However the negotiations for these medicine would outline the costs to be paid for prescriptions beginning in 2026. For 2027 and 2028, 15 extra medicine per yr shall be chosen for worth negotiations. Beginning in 2029, 20 extra shall be chosen a yr. 

That stated, different provisions within the laws have already led to financial savings for seniors, stated Tricia Neuman, a senior vice chairman at KFF:

• Sure beneficial grownup vaccines coated underneath Medicare Half D, corresponding to shingles, are coated for gratis. 
• The act established a cap on Half D spending that begins phasing on this yr. This yr, Half D enrollees can pay not more than $3,300 on brand-name medicine. In 2025, the cap for all coated Half D medicine drops to $2,000.
• The Inflation Discount Act included the $35-a-month insulin cap, enhancements in protection for low-income beneficiaries, and the inflation rebate.

Once we pressed the White Home to offer examples of financial savings which have already occurred, a spokesperson pointed to the insulin cap.

In the meantime, Antos stated that though the Half D rebate has kicked in, the financial savings come from a small subset of Half D medicine taken by older Individuals and that the federal government reaps the financial savings, not older Individuals.  

“There is no such thing as a motive to count on that seniors will see important financial savings since there’s no obligation for the feds to distribute financial savings to Half D enrollees,” Antos stated.

Our Ruling

Biden stated, “We reduce the federal deficit by $160 billion as a result of Medicare will not should pay these exorbitant costs to Large Pharma.”

Biden’s assertion omits the timeframe; the financial savings haven’t been realized. The CBO projected 10-year cumulative financial savings of $161.7 billion from two provisions of the laws. And as for saving older Individuals cash on their prescriptions, that hasn’t occurred but. The federal authorities is negotiating the primary 10 medicine with the brand new costs set to take impact in 2026.

We price this assertion Half True.

Sources

KFF, “3 Charts: Medicare Drug Worth Negotiations,” Jan. 31, 2024

White Home, “Price range Cuts Wasteful Spending on Large Pharma, Large Oil, and Different Particular Pursuits, Cracks Down on Systemic Fraud, and Makes Applications Extra Price Efficient,” March 9, 2023

E mail interview, Matthew Fiedler, senior fellow in financial research, Heart on Well being Coverage at The Brookings Establishment, March 8, 2024

E mail interview, Tricia Neuman, a senior vice chairman of KFF and the manager director of its Program on Medicare Coverage, March 8, 2024

E mail interview, Joe Antos, a senior fellow on the American Enterprise Institute, March 8, 2024

White Home, assertion to PolitiFact, March 8, 2024

President Joe Biden, remarks on well being care prices, Aug. 29, 2023

Congressional Price range Workplace, “Estimated Budgetary Results of Public Regulation 117-169, to Present for Reconciliation Pursuant to Title II of S. Con. Res. 14,” Sept. 7, 2022

Congressional Price range Workplace, “How CBO Estimated the Budgetary Affect of Key Prescription Drug Provisions within the 2022 Reconciliation Act,” February 2023

KFF, “Explaining the Prescription Drug Provisions within the Inflation Discount Act,” Jan. 24, 2023

NBC Information, “Medicare Names First 10 Medication up for Worth Negotiations With the Authorities,” Aug. 29, 2023

PolitiFact, “Democrats’ Inflation Discount Act Will Permit Medicare to Negotiate Drug Costs,” Aug. 10, 2022

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