We often get asked about the expected impact of Medicare’s new drug price negotiations on commercial (employer-sponsored) health plans.
The short answer: While there is no direct legislative impact, there may well be practical repercussions over time. Our opinion is based on the following:
- Most of the drugs included in the first round of negotiations are coming off-patent and expected to have generic or biosimilar alternatives by the time the negotiated prices go into effect in 2026. So, likely much ado about nothing.
- If Medicare is successful in lowering the cost of certain prescriptions, that means drug companies will be looking to recoup lost revenue elsewhere. And the most likely cost-shifting destinations may be the price of other drugs in general and/or specifically targeting commercial plans.
- Once Medicare sets a new price, there’s also a strong possibility PBMs will negotiate to (or toward) that price. Under the current prevailing PBM model, the price reconciliation may be in the form of higher rebates. And as you know, not all rebate dollars make it to the pockets of plan sponsors and members.
- While there is much talk of price controls leading to less drug development/innovation and less generic/biosimilar competition, we believe these not-so-thinly-veiled threats are mostly bluster. Instead, maybe price negotiations will actually force drug manufacturers to come to market with medications that have more certain and compelling value propositions (clinical outcomes).
Interested in learning more? This article is pretty consistent with our thoughts on the subject.