With the first list of medicines out, let’s not forget why government price setting is bad policy

CMS released the first list of medicines that will be subject to government price setting in Medicare — an arbitrary and politicized process being launched under an extremely compressed timetable. Just a little over a year after the IRA passed, the government is ushering in mandated prices for medicines that will focus on short-term political objectives rather than the real-world needs of current and future Medicare beneficiaries.

Here are three key reasons why this is just bad policy. 

1. Seniors may not benefit from government price setting and could see their access restricted. Part D insurance plans are required to cover medicines that are selected for price setting, but they can still impose access restrictions, such as prior authorization or step therapy. And they can still move medicines — including those that are price set by the government — to more expensive, non-preferred and specialty formulary tiers that have higher out-of-pocket costs and more requirements for step therapy and prior authorization. Part D plans may also stop covering some medicines altogether since they are only required to cover the price-set medicine and one other medicine in most therapeutic classes. 

2. It ignores the existing savings from private sector negotiation and competition in Part D. Robust competition in Part D has led to significant discounts off the list price of most medicines covered by Medicare. In 2021, these private market negotiations lowered total Part D spending by 23%, according to the government’s own data. Requiring insurers and PBMs to share these savings with seniors would more directly lower out-of-pocket costs than government-mandated price setting. 

3. The government’s arbitrary process for deciding the price of medicines will drive research and investment away from potentially lifesaving treatment options for Medicare patients. The IRA empowers the government to make unilateral and arbitrary decisions about what innovation is valued and what is not, which could lead to less investment in treatments aimed at addressing seniors’ greatest needs. Plus, medicines that come in pill or capsule form — also known as small molecule medicines — will be price set years earlier than other medicines, disincentivizing their development.  

CMS had the potential to mitigate some of the harms of the price setting program when it finalized its guidance earlier this summer, but the agency failed to do so by: 

• Not committing to how much input patients, providers or others will have throughout the rest of the process.  
• Refusing to disclose information about how CMS will set medicine prices until months after the decisions are made. 
• Using an extremely broad definition of a drug subject to price setting, deciding that any form of a drug from the same manufacturer with the same core molecule or active ingredient will be swept into the price setting process, even if a newer version represents significant value to patients. 
• Inhibiting biosimilar and generic competition by failing to fully accommodate for when they come to market and how these products are or are not covered by insurance — meaning those critical medicines might not “count” as competition, even in cases where they have been launched and introduced into the market. That means biosimilar or generic manufacturers unable to reach CMS’ standard for being a direct “competitor” will be forced to compete against brand medicines with government-set prices, significantly reducing the incentive to bring generic and biosimilar competitors to market. 

Ultimately, CMS has disregarded concerns brought forth by patients, providers, manufacturers and other stakeholders. Policymakers should choose to stand with patients and future treatments and cures. Instead, the government is putting patients’ access to medicines further at risk both now and for future generations.

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