Rising inflation is squeezing the budgets of seniors with a fixed income. While seniors search for strategies to cope with inflation, there is little they can do about healthcare costs. Prescription drugs are a necessity many seniors can’t live without.
Unfortunately, the price of many prescription drugs is rising faster than inflation. A recent analysis by the Kaiser Family Foundation found that half of the 3,343 drugs covered by Medicare Part D and nearly half of the 568 drugs covered by Medicare Part B increased in price by more than the inflation rate in 2020. While inflation has soared in recent months, one-third of those drugs increased in price by more than the current 7.5% inflation rate.
The three most popular drugs covered by Medicare Part D — the blood thinners Eliquis and Xarelto and multiple myeloma medication Revlimid — all increased in price during 2020 by more than the inflation rate. Medicare recipients commonly pay a portion of the cost of drugs covered by Part D and nearly always pay a share when they purchase Part B drugs. The high cost of drugs covered by Medicare places a strain on the federal budget as well as family budgets.
Barriers to Legislative Solutions
Like most prices, prescription drug costs are not regulated by law. Drug companies are free to charge whatever the market will bear. Since drug companies are protected from substantial competition while patents are in effect, competitive forces have little impact on drug prices until competitors are able to market a generic equivalent.
Pharmaceutical companies argue that inflated prices for patented drugs allow them to recoup investments in drug research. Patent rights in drugs may stimulate innovation, although drug companies tend to focus their efforts on making minor changes to popular drugs so they can patent them again rather than developing drugs for health conditions that are not widespread. Fear of inhibiting the development of new drugs, along with aggressive lobbying by the pharmaceutical industry, stand in the way of regulatory efforts to impose price controls on essential drugs.
Build Back Better and Drug Prices
One proposed legislative solution is included in the massive Build Back Better bill. The version passed by the House of Representatives would lower drug prices by allowing the federal government to negotiate prices for certain drugs that are covered by Medicare. Since the federal government pays most or all of the cost of those drugs, giving the government the same power that private insurers have to negotiate with drug companies would level the playing field by removing a barrier that keeps prices high. Unfortunately, current legislation, added to the Medicare law “in the dead of night,” prohibits the government from negotiating prices with drug companies.
The House version of Build Back Better would also: cap out-of-pocket spending for Medicare Part D enrollees; implement inflation rebates to limit annual increases in drug prices, both in Medicare and private insurance; limit monthly copays for insulin to $35; and improve Medicare coverage of adult vaccines. It would also repeal the Trump administration’s ill-advised drug rebate rule.
About two-thirds of voters who have reached the age of 65 believe that limiting prescription drug price increases should be a top legislative priority. Since seniors are a reliable voting bloc, both parties should consider the political wisdom of listening to their concerns.
In the absence of bipartisan support, Build Back Batter has stalled in the Senate. While the administration may pursue a scaled-down version of the bill, key components that would help seniors cope with rising drug prices remain in limbo. Seniors will need to urge their elected representatives to make drug price report an urgent priority if they want relief from unchecked increases in drug prices.