For years, prescription drug price increases dwarfed even the highest rates of general inflation. If consumer gas prices at the pump rose at the same rate as Rx drugs over the last fifteen years, drivers today would be paying over $13 a gallon to fill up.
Last year, Democrats passed the Inflation Reduction Act, which, for the first time, allows Medicare to use its purchasing power to directly negotiate prescription drug prices with big pharmaceutical companies. The law is estimated to help save $288 billion over the next decade through lower drug costs.
Seeking to build on and accelerate the progress of the Inflation Reduction Act and expand it to lower more prescription drug prices for consumers, U.S. Senators Jack Reed (D-RI) and Sheldon Whitehouse (D-RI) are teaming up with Senators Amy Klobuchar (D-MN), Peter Welch (D-VT), and 18 of their colleagues on new legislation to boost Medicare’s ability to negotiate drug prices and lower prescription drug costs for consumers. The Strengthening Medicare and Reducing Taxpayers (SMART) Prices Act would give the U.S. Department of Health and Human Services (HHS) additional authority to negotiate for Medicare Part D.
This legislation would unleash the power of Medicare’s 50 million seniors to help lower drug prices for all Americans. The SMART Prices Act builds on recent progress, specifically lowering Medicare Part B drug prices through negotiation two years earlier than under current law, and increasing the overall number of drugs that HHS can negotiate starting in 2026.
“Last year, we took significant steps towards bringing down prescription costs when provisions based on my bill to allow Medicare to negotiate prescription drug prices were signed into law. But there’s still more we can do to build on this progress,” said Senator Klobuchar. “By strengthening Medicare’s ability to negotiate drug prices, our legislation will lower prescription costs on even more drugs and save taxpayers money. I’ll keep working to ensure all Americans can reliably access the affordable, life-saving medications they need.”
“For too long, Big Pharma got away with unfairly over-charging Americans for prescription drugs. Democrats changed that by passing the Inflation Reduction Act to allow Medicare to use its purchasing power to negotiate lower prices. The SMART Prices Act would accelerate and expand the progress from that new law by making life-saving medications more affordable for all,” said Senator Reed.
“Democrats’ historic Inflation Reduction Act finally gave Medicare a seat at the table to negotiate lower drug prices for our nation’s seniors. As those negotiations kick off in earnest this year, we should build on our progress by passing the SMART Prices Act, legislation that will strengthen Medicare’s hand and help lower health care costs for seniors and families,” said Senator Whitehouse.
The Strengthening Medicare and Reducing Taxpayer (SMART) Prices Act would also allow prescription drugs and biologics to be eligible for negotiation five years after approval by the Food and Drug Administration. The bill would also increase the overall amount by which Medicare can lower prices through negotiation.
Each year, Medicare spends more than $135 billion on prescription drugs.
The SMART Prices Act is endorsed by the Center for American Progress, Families USA, Lower Drug Prices Now, National Multiple Sclerosis Society, Patients For Affordable Drugs, Protect Our Care, and Public Citizen.
In addition to Klobuchar, Welch, Reed, and Whitehouse, the bill is cosponsored by U.S. Senators Tammy Baldwin (D-WI), Richard Blumenthal (D-CT), Sherrod Brown (D-OH), Cory Booker (D-NJ), Ben Cardin (D-MD), Maria Cantwell (D-WA), Catherine Cortez Masto (D-NV), Maggie Hassan (D-NH), Angus King (I-ME), Dick Durbin (D-IL), Kirsten Gillibrand (D-NY), Martin Heinrich (D-NM), Jeff Merkley (D-OR), Debbie Stabenow (D-MI), Jeanne Shaheen (D-NH), Tina Smith (D-MN), Elizabeth Warren (D-MA), and Patty Murray (D-WA).
“The SMART Prices Act builds on the momentum generated by the enactment of the Inflation Reduction Act to expand its reach and bring relief to more people by increasing the number of drugs subject to Medicare negotiation and mandating earlier negotiation. This bill moves us in the right direction to continue to overhaul the current drug price system to ensure it works for the patients it is supposed to serve instead of the people who profit from it,” said David Mitchell, cancer patient and founder of Patients For Affordable Drugs Now.
In addition to granting Medicare new negotiating powers, the Inflation Reduction Act, which President Biden signed into law, also requires drug manufacturers to pay rebates to Medicare if they increase prices faster than inflation for drugs used by Medicare beneficiaries. According to the Kaiser family Foundation, from 2019 to 2020, half of all drugs covered by Medicare had price increases above the rate of inflation over that period, and among those drugs with price increases above the rate of inflation, one-third had price increases of 7.5 percent or more, the annual inflation rate in early 2022.
The Inflation Reduction Act also includes several provisions that will reduce out-of-pocket spending for Medicare beneficiaries:
- Caps Medicare beneficiaries’ out-of-pocket spending under the Medicare Part D benefit, first by eliminating coinsurance above the catastrophic threshold in 2024 and then by adding a $2,000 cap on spending in 2025.
- Limits cost sharing for insulin to $35 per month for people with Medicare.
- Expands eligibility for full Part D Low-Income Subsidies.
- Eliminates cost sharing for adult vaccines covered under Medicare Part D.
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