Medicare Monday: A refresh on private negotiation in Part D

Medicare Monday looks at the private negotiation that occurs within Part D and why interfering with this negotiation could negatively impact beneficiaries.

Nicole LongoJanuary 9, 2017

Medicare Monday: A refresh on private negotiation in Part D.


Last week, we highlighted a number of Medicare resources – from how to learn more about which medicines are covered in Part B to how Part D has been a success since its implementation. And this week, we thought we’d dive into the structure of Part D, specifically the private negotiation that occurs within the program and why interfering with this negotiation could negatively impact beneficiaries.

To start, how does private negotiation work in Part D? Part D purchasers negotiate discounts and rebates with prescription drug manufacturers. Because these large, powerful purchasers represent as many as 60 to 120 million covered lives, they have significant leverage to negotiate large discounts and rebates with manufacturers on behalf of Part D plans. Several sources have cited evidence of the robust negotiation occurring in the program. As part of the program’s creation, a non-interference clause was included that prohibits the government from interfering in these private price negotiations.

However, some proposals have suggested that repealing the non-interference clause would enable the government to negotiate lower Part D drug prices than are already negotiated in the current competitive structure. But here’s a look at what’s been said about such misleading proposals:

  • The Congressional Budget Office (CBO) has stated that “the Secretary would be unable to negotiate prices across the broad range of covered Part D drugs that are more favorable than those obtained by [Prescription Drug Plans] under current law.” CBO has also found that for the government to negotiate lower prices, it would have to place either access or coverage restrictions on medicines for Part D beneficiaries, stating “… the negotiating lever that’s used to lower drug prices is the threat of not allowing that drug to be prescribed or putting limitations on its being prescribed within that drug plan.”
  • STAT News commented on the potential negative impact such proposals would have on beneficiaries, stating “There’s a basic trade-off that any proposal would have to grapple with: To have any real effect on drug prices, Medicare would have to be able to say ‘no’ to drugs that might be expensive, but are still badly needed by people with chronic conditions.”
  • The New York Times reported that “if you talk to experts who study the pharmaceutical market in the United States, they aren’t optimistic that, by itself, letting the government play drug negotiator would take a big bite out of prescription drug spending.”
  • And Morning Consult explained that “This is a common pitch as a solution to rising drug costs […]. But without more detail, it’s hard to know what impact it would have. […] Even without the details, some question the proposal’s effectiveness at lowering taxpayer costs or drug prices.”

Both Bloomberg and the Washington Post have also talked about the flaws with such proposals.

We must continue to protect the structure of Medicare Part D to ensure that beneficiaries – America’s seniors and patients with disabilities – have affordable access to the prescription medicines they need.

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