When he was running for president in 2020, Joe Biden promised to reduce the soaring cost of prescription medications. While President Trump signed executive orders in 2018 that were purportedly designed to accomplish that task, federal courts blocked the orders and drug prices continued to rise. The Congressional Budget Office determined that the orders, had they remained in effect, would have raised Medicare premiums while increasing drug company profits.

Drug prices were a key target of the Inflation Reduction Act, a law that Congress enacted in 2022 and that President Biden supported. The Act allows the agency that administers Medicare to negotiate drug prices with pharmaceutical companies, just as private insurance companies do.

Giving Medicare the same opportunity to negotiate drug prices that private insurers enjoy should not be controversial, but the law was fiercely opposed by the pharmaceutical industry and its lobbyists. Party-line votes allowed the Act to be passed by a single vote in the Senate and a handful of votes in the House of Representatives.

How Rising Drug Costs Hurt Seniors

Medicare Part D provides prescription drug coverage for seniors who elect that benefit. A smaller group of drugs is covered by Medicare Part B.

The Kaiser Family Foundation found that half of all prescription drugs covered by Medicare Part D and nearly half of the drugs covered by Part B increased in price between 2019 and 2020 at a higher rate than inflation. The drugs on which Medicare Parts B and D spends the most money were among those that had increased in price more rapidly than the inflation rate.

Most Americans over the age of 65 take prescription medications. About one-in-four seniors struggle to pay for them. While low-income seniors and people of color are the most vulnerable to soaring drug prices, drug prices strain the budgets of most Americans as they grow older. Drug coverage under Part D requires patients to purchase drugs out of their own pockets until they reach a deductible. They then pay 25% of the drug cost until out-of-pocket spending reaches $8,000.

Policy analysts predicted in 2020 that by 2030, “112,000 seniors each year could die prematurely because drug prices and associated cost-sharing are so high that they cannot afford their medication.” Because older adults may experience new or exacerbated health consequences when they don’t take a prescribed medication, Medicare spending for preventable health conditions increases when seniors can’t afford prescription drugs.

Drug Price Negotiations

The Inflation Reduction Act delivered an immediate benefit for seniors who use Medicare to pay for insulin. The monthly out-of-pocket cost of insulin has been capped at $35 a month. The legislation caused a trickle-down effect, in that several drug companies voluntarily reduced the cost of insulin for everyone.

Beginning in 2025, patients who rely on Medicare Part D for drug coverage will not have to pay more than $2,000 annually from their own pockets for their medications. That reduction in the Part D deductible will likely help seniors who now skip dosages of medications that they can’t afford.

Negotiated price reductions in other drugs will begin to take effect in 2026. The first round of negotiations targeted ten expensive drugs, including widely prescribed blood thinners, arthritis medications, and drugs that protect against heart failure. Medicare will impose caps on the price that seniors will pay under Part D for a one-month supply of these drugs:

• Eliquis (capped at $231 per month)
• Jardiance ($197)
• Xarelto ($197)
• Januvia ($113)
• Farxiga ($178)
• Entresto ($295)
• Enbrel ($2,355)
• Imbruvica ($9,319)
• Stelara ($4,695)
• Fiasp and NovoLog ($119)

More than nine million Medicare Part D beneficiaries take at least one of those drugs.

While the announced price negotiations affect only ten drugs, Medicare plans to negotiate the prices of five hundred drugs over the next ten years. And while the pharmaceutical industry filed a flurry of lawsuits to prevent the government from negotiating drug prices, the Inflation Reduction Act was enacted by Congress and is thus less vulnerable to legal challenges than Trump’s executive orders. The industry’s lawsuits have met with little success to date.