US Government to Tackle Medicare Drug Payments to Try to Cut Costs

By Reuters Staff

September 10, 2021

WASHINGTON (Reuters) - President Joe Biden's administration on Thursday unveiled its promised initiative aimed at cutting drug prices, saying it will test new ways to reduce such costs for the Medicare health insurance program including tying payments for medications to their effectiveness.

The U.S. Department of Health and Human Services (HHS), which oversees the federal medical insurance program for people age 65 and older and the disabled, announced the initiative, which will use models to gauge the clinical value of medicines to determine how much Medicare pays for them.

The department also said it will test so-called bundled payment models for Medicare and gather data from insurers to improve transparency.

The Biden administration is separately backing legislation in Congress that would seek to stem rising drug prices.

Efforts to make changes to Medicare, which covers more than 61 million people in the United States, can have ripple effects as other private health insurers can also follow suit.

While the administration has lauded drugmakers for their efforts amid the COVID-19 pandemic, it also has highlighted the high costs of medications in the United States compared to other nations. Pharmaceutical manufacturers have raised prices on more than 500 medicines, according to an analysis by healthcare research firm 46brooklyn in January.

Pharmaceutical manufacturers have opposed efforts to regulate drug prices, calling them "misguided" and saying this would stifle innovation.

HHS Secretary Xavier Becerra defended the administration's plan. He said letting Medicare negotiate for drug prices under Part B - which among other things covers medications used in hospitals and other healthcare settings - would "make those prices available to other purchasers." That could help patients pay less and reduce costs not only for the federal government but also other commercial payers, he said.

The department also said it will test ways to reduce costs under Part D, which covers over-the-counter drugs, through biosimilars and generic drugs.

"By promoting negotiation, competition, and innovation in the healthcare industry, we will ensure cost fairness and protect access to care," Becerra said.

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