This is a BFD former President Obama tweeted to describe the Inflation Reduction Act.
A historic achievement
The climate, tax and healthcare bill known as the Inflation Reduction Act was signed into law recently.
The bill is a scaled down version of some of the Democrat Party's wish list. Still it does represent a major accomplishment.
It targets deficit reduction, domestic energy production and reduction of emissions. But of most interest to seniors is the part which will give Medicare permission to negotiate for prescription drug prices.
♦ The bill includes significant changes to the Medicare program that will kick in over the next few years.
Democrats passed this bill without any Senate Republican support.
• It has provisions designed to try to control rising prescription drug costs for seniors. Something many Republicans and the majority of Americans have being calling for.
The legislation is smaller than what many Democrats originally hoped for last year.
♦ Seniors won’t get help with hearing, vision or dental this time around. But they will finally get some help with skyrocketing drug costs.
How much help?
On paper it promises a lot. But in real life, it is going to take time before we really know.
The Inflation Reduction Act includes several healthcare provisions that would lower prescription drug costs for people with Medicare, reduce Medicare drug spending and extend enhanced subsidies for Affordable Care Act marketplace coverage.
• The legislation would require the U.S. Secretary of Health and Human Services to negotiate directly with drug manufacturers over the price of some high-cost drugs in the Medicare program.
• It also would require drug companies to pay a rebate to the government if prices rise faster than inflation based on drug use by Medicare beneficiaries.
• It will cap overall out-of-pocket drug costs for people with Medicare at $2,000 a year.
• It will limit Medicare beneficiaries’ out-of-pocket spending on insulin products covered by their Medicare Part D plan to $35 per month.
♦ The bill also would extend for three years the enhanced ACA subsidies that Congress passed last year as part of the American Rescue Plan Act.
That temporary boost increased the amount of financial help available to people already eligible to buy subsidized health plans in the ACA Marketplaces, and expanded subsidies to more middle-income people, many of whom were previously priced out of coverage.
These enhanced subsidies will now continue through 2025.
• The CBO estimates that the drug pricing provisions in the reconciliation bill will reduce the federal deficit by $237 billion over 10 years (2022-2031).
What could mess things up?
Experts fear pharmaceutical companies could exploit loopholes in the bill, ultimately keeping prescription costs high for many.
Because it will take several years before the law is fully implemented, pharmaceutical companies may have ample time to go on the offensive.
They are likely to go to court to try to get the law thrown out. Big Pharma also has a number of allies in the Republican Party that are still willing to try to introduce legislation to undo some of the new law.
• Big Pharma is expected to try to figure out ways to sidestep provisions that affect their ability to maintain their high profits.
One likely happening is that more pharmaceutical companies will release generic versions of their medications in the coming years to avoid the law’s provision that allows the government to negotiate drug prices on brand drugs.
At the same time, pharmaceutical companies may keep the generic in house so they can get all profit from both the brand and the generic.
• A sneaky way would be for a company to withdraw a brand drug to avoid price negotiations. And then reintroduces it as a reformulated version. The reformulated version would likely be treated as new product which they could avoid price negotiations for 9 to 13 years depending on the class of drug.
Pharmaceutical companies have been using this technique for years to prevent profitable drugs from going generic. So, this should not be a surprise.
The law has a lot of parts. If they all come together, this could be a big deal for seniors.
What will be negotiated, who will be affected, how much and more. If you would like to learn more of the details, read this lengthy article: Medicare Drug Costs.