Reconciliation Bill Proves More Damaging and Expensive

The Congressional Budget Office (CBO) has announced that a provision in the reconciliation bill, which expands exemptions from Medicare’s drug negotiation program, will cost significantly more than initially estimated. The updated price tag is now $8.8 billion, an 80% increase from the CBO’s original estimate of $4.9 billion. The revision aims to more accurately represent the extent of the policy change. Details about the provision can be found in the CBO’s report.

Implications of the HR 1 Bill for “Orphan Drug” Pricing

Typically, high-cost drugs that have been in the market for a considerable period without competition are eligible for Medicare price negotiation under the Inflation Reduction Act (IRA). However, some drugs, specifically “orphan drugs” for rare diseases, were excluded. The reconciliation bill (HR 1) expands on this exclusion, allowing more orphan drugs to either delay negotiation or bypass the program entirely. Originally, the CBO did not fully factor in how these enhanced exclusions would increase Medicare costs, omitting critical drugs like Keytruda, Darzalex, and Opdivo from its analysis.

In 2023, Medicare reportedly spent $17.5 billion on drugs that are likely to be delayed or blocked from negotiation due to the HR 1 bill, according to certain independent experts. These experts filled in the gaps left by the CBO by producing comprehensive reports examining the HR 1 policy change. A recent report from the Kaiser Family Foundation (KFF) incorporates the drugs initially overlooked by the CBO, indicating that in 2023, Medicare’s spending on Keytruda, Darzalex, and Opdivo was $5.6 billion, $2.4 billion, and $2 billion respectively. The updated CBO analysis now includes these amounts.

Cost Implications for All Beneficiaries

HR 1’s additional exemptions not only inflate Medicare’s spending by nearly $4 billion but also undercut the IRA’s projected 10-year $98.5 billion savings to the Medicare program. This will result in beneficiaries saving less than originally anticipated from the drug negotiation program in terms of premiums and out-of-pocket costs. Those beneficiaries who rely on the newly exempted drugs will be hit the hardest. KFF estimates that the annual cost for beneficiaries who take Keytruda and Opdivo will increase by roughly $3,500 and $3,000, respectively.

Call for Reforms in Affordable Access to Prescription Drugs

There is high concern surrounding the impact of HR 1’s changes to drug pricing on Medicare’s financing and prescription drug affordability. By limiting negotiation, uncaptured costs will pile up and compound annually, leading to escalating drug prices and potentially jeopardizing the health and economic security of beneficiaries. Policymakers are urged to promptly reverse this provision and work towards enhancing affordable access to quality healthcare and prescription drugs.