Medicare Part B is a market-based system that has enabled millions of seniors and patients with disabilities to access needed medicines. Reimbursement for medicines in Part B is based on the Average Sales Price of a medicine, which reflects rebates and discounts negotiated in the commercial market and Medicare Part B, subject to certain exceptions. Although this system has worked well at controlling costs for beneficiaries and the government, the Administration has proposed setting medicine prices in the United States based on the prices set by foreign governments with severely restricted access to new medicines. Many are questioning how the proposal would work.
In a recent editorial, the Wall Street Journal explained why this proposal puts at risk America’s role as global leader in medical innovation:
- “The reason European countries pay less for drugs is because they run single-payer health systems and dictate the prices they’re willing to pay. Don’t like it? They’ll then vitiate your patents and make a copycat. This is hardly a ‘voluntary’ discount. …
- “By the way, Europe does pay more—in the form of reduced access. Of 74 cancer drugs launched between 2011 and 2018, 70 (95%) are available in the United States. Compare that with 74% in the U.K., 49% in Japan, and 8% in Greece. This should cure anyone of the delusion that these countries will simply start to pay more for drugs. They’re willing to deny treatments if it saves money. …
- “Mr. Trump is right that Europe, Australia and many others are freeloaders on U.S. innovation, and better intellectual property protections in trade deals might help. But that is no reason to repeat their price-control mistake and undermine the reasons the United States is the last, best hope for medical progress.”
And just this week, The New York Times corrected the record on a number of false claims regarding the proposal and how Medicare Part B currently reimburses for medicines:
- “In his zeal to fulfill a campaign promise, President Trump has correctly identified high drug prices as a major problem for many Americans. But in defending his proposed solutions, he has sometimes stretched the facts. …
- “[I]t is a stretch to say that drug companies voluntarily provide discounts abroad. … Many O.E.C.D. countries have single-payer systems in which the government is essentially setting prices and telling companies what it will pay for coverage. That’s how they can extract substantial reductions relative to prices paid in the United States. …
- “It is true that the government does not negotiate with drug manufacturers to determine the prices paid for drugs in Part B of Medicare. But the prices paid for many of those drugs do reflect the results of competition and negotiations in the private sector.
- “Under the Medicare Modernization Act of 2003, the government’s payment for a Part B drug is based on the drug’s ‘average sales price.’ This price, as defined in the law, accounts for commercial discounts, rebates and other price concessions that drug manufacturers negotiate with health insurance plans, pharmacy benefit managers and other private purchasers. These price concessions, generally treated as trade secrets, may knock 15 to 35 percent off the list price of a drug.”
The Administration’s reference pricing proposal could ultimately run counter to its stated goal of expanding patient access to lifesaving drugs. Not only does the proposal rely on flawed foreign pricing benchmarks, it could stifle industry innovation and undermine progress made in Part B.
Learn more about the value of Medicare Part B here.
