Steph’s Note: After a couple weeks of hard-hitting clinical knowledge drops, we’re flipping the page to a non-clinical but VERY important topic - drug pricing. ICYMI, some pretty major changes are coming due to recent legislation, and regardless of your pharmacy practice area, you should be at least a little familiar with what to expect. To get you up to speed, we have Lambert Peng, community pharmacist guru, here to do some ‘splaining. You may remember Lambert from his previous post on preventing common retail pharmacy computer mistakes (and if you don’t, you should definitely check out that tl;dr debut post!).

New legislation passed to lower drug prices

If you’ve been following the news, you likely know that Congress recently passed legislation to lower prescription drug prices. In this post, I will attempt to explain, in a tl;dr way, how various provisions of this legislation work.

I promise this won’t be your pharmacy school law course all over again. Nobody wants to relive that.

The drug pricing legislation itself is part of the larger budget reconciliation package known as the “Inflation Reduction Act of 2022.” FYI, don’t confuse it with the “Elijah Cummings Lower Drug Costs Now Act,” which was introduced in the House but seems to have stalled. Also don’t confuse it with the “Build Back Better Act,” which was a colossal package that had a very high-profile fall from grace.

Nevertheless, even though these other bills didn’t make the cut, it appears the lawmakers who wrote the Inflation Reduction Act took many ideas from those drafts. So what are some of the drug-related ideas contained within the Inflation Reduction Act?

Medicare will be able to negotiate prices for the most expensive drugs

If you don’t know much about this topic, you might be wondering why that would be such a big deal. “Okay,” you might think. “So Medicare can now try to ‘negotiate’ with drug makers to lower their prices… which apparently it couldn’t do before… and only for the most expensive drugs. Most people under 65 aren’t even covered by Medicare. How can this legislation possibly make a difference to anyone?”

As it turns out, unlocking this seemingly simple little ability actually unleashes a lot of power.

The first thing you should understand is that Medicare is a massive, massive entity. Think about how much of your paycheck gets taken out to pay for Medicare. Also think about how many prescription drugs elderly patients consume. In other words, we can say that Medicare pays for a LARGE portion of drugs dispensed in this country.

In fact, according to the Kaiser Family Foundation, Medicare accounted for almost a third of total prescription expenditures in the US in 2017, second only to private insurances. In 2019, that prescription bill totaled ~$183 billion (BILLION) between Medicare Parts B and D.

So yeah. When we say a large portion of prescription costs, we’re not kidding. Medicare is a major player.

The second thing you should understand is that, even though Medicare doesn’t cover everyone, its policies are still hugely influential and copied by many private insurance companies. For example, a few years ago, when Medicare started requiring day supply limits on initial fills of opioid prescriptions, many private companies started modeling their opioid policies after that of Medicare.

With such a massive market influenced by Medicare, you can imagine how any change to the way it conducts its business will have huge ripple effects across the entire pharmaceutical world. So it has a lot of leverage when negotiating with drug companies.

This means that, when legislators talk about Medicare “negotiating” prices with drug manufacturers, the negotiation process is not like this:

Medicare politely walks up to the huge pharma company and taps it on the shoulder.
The pharma company turns around and growls, “What do you want?”
Medicare squeaks, “Can you please set the price of XYZ drug to XYZ dollars? Please? Pretty please?”

Instead, the process is more something like this:

Medicare is a giant, glaring down at the tiny pharma company.
It makes the company an “offer it can’t refuse.”

With all that said, remember that this bill does not mean drug prices will just suddenly start going down for everyone. The negotiation provision does not apply to all drugs—only the top 10 drugs that currently cost Medicare the most.

It also will not go into effect until the year 2026. In 2027 and 2028, it will expand to cover 15 more drugs, and then eventually 20 more drugs in 2029. And, of course, remember that all this applies only to Medicare patients. People who don’t have Medicare coverage will not see this benefit.

You may wonder: Why only the top 10 drugs? Why not all drugs, immediately?

The short, simple, tl;dr Pharmacy answer is this: politics.

If the bill allowed all Medicare drugs to be negotiated all at once, there’s no way it would have been able to get enough votes to pass through the current Congress. (If you want a more detailed explanation, there are tons of news stories out there covering that. We don’t stick our noses too far into politics at tl;dr, so I’ll just leave it at that.)

Insulin will cost no more than $35 per month (but not for everyone)

This part of the law also made a lot of headlines. Originally, the Inflation Reduction Act was going to ensure that all insured patients paid no more than $35 per month for insulin. But that part has since been stripped down, so it now applies only to Medicare patients. All other patients who have private insurance or who pay out of pocket will still have to pay whatever price or copay they get charged for insulin.

Why did they remove the insulin cap for non-Medicare patients? Again, here is the short, simple, tl;dr Pharmacy answer: politics.

Note that there are some other details in the fine print of the bill that have been overlooked by many news outlets, but these are very relevant to us pharmacists:

None of these changes start taking effect until next year, 2023. So if a patient walks up to the counter next month complaining that their insulin should cost no more than $35, you will need to remind him or her that the new law doesn’t go into effect until next year.
Insurance companies might have trouble adjusting their computer systems to account for the new changes, and the lawmakers have anticipated that. In the first three months of 2023, it is permissible for a patient to get charged more than $35 at the cash register. The insurance company will be required to reimburse the patient the difference within 30 days, but the patient still has to have that money available to make the purchase.
The insulin cap only applies to insulin already covered by the plan’s individual formulary. It does not mean that all insulin products suddenly and automatically have to be covered down to $35. For example, if you try to dispense Lantus when Basaglar is on the formulary, the Basaglar would be $35, but Lantus will still be rejected as “Drug Not Covered.”
It is not clear whether the $35 applies to all insulin products that the patient buys for that month cumulatively, or just for each individual “line” of insulin. For example, if a patient takes both Basaglar and Novolog, I can’t tell whether the two products combined will cost the patient $35 or $70 for that month. The actual text of the bill defines a “covered insulin product” simply as “an insulin product that is a covered part D drug covered under the prescription drug plan…” I take that to mean each individual insulin product would be subject to its own $35 cap (so the patient would pay $70), but if there are any lawyers or law-savvy readers out there, please feel free to correct me.
In the same vein as the previous bullet point, how will generics or biosimilars for insulin be treated? Will Novolog be treated as a different “covered insulin product” than generic insulin aspart? What about different manufacturers?
According to the text of the bill, the insulin cap applies to “a month’s supply” of insulin. This could be problematic. For example, let’s say a patient fills a prescription for a 30-day supply of Lantus for $35. Then, the doctor increases the dose of Lantus, so that the prescription now lasts only 15 days. If the patient returns to the pharmacy within 15 days to fill another 30 day supply of Lantus, would that refill be treated as a new month of insulin (thereby costing another $35), or would it just be added on to the $35 that the patient has already paid? From what I can interpret, it seems like the patient would probably be charged another $35.

One other note about insulin. There are some non-Medicare insurance companies that have pledged to limit their own copays of insulin to $35 per month, regardless of what passes in the law. You might have some patients asking you about this. From what I understand, only certain brands of insulin would be subject to this pledge, and the actual discount process would probably involve discount cards and codes at the pharmacy counter, which I know you all love to work with.

(Some) Medicare vaccines will be free

The Inflation Reduction Act eliminates “cost-sharing and deductible” for vaccines recommended by the Advisory Committee of Immunization Practices (ACIP) covered by Medicare Part D.

This provision actually won’t make as much of a difference as you might think. Most of the common vaccines (flu, tetanus, pneumonia, COVID, etc.) that Medicare patients receive at the pharmacy are already billed to Part B with a resulting copay of $0. The only common vaccine I can think of that currently is billed to Part D is Shingrix (which, I admit, can be costly). Thus, from a retail pharmacist’s perspective, the only major change that we will see is that Shingrix will become free for many Medicare patients.

Another important caveat is that the free vaccine must be ACIP-recommended. This means that, no, the plan will not cover Gardasil for a 65-year old - even if they are immunosuppressed and it is clinically indicated.

Other pharmacy-related provisions of the 2022 Inflation Reduction Act

The Inflation Reduction Act provides for a few other things. These provisions were not as controversial, and they passed with generally bipartisan support:

Starting in 2025, Medicare patients will pay no more than $2000 out of pocket per year for prescriptions.
Pharma companies will have to pay a hefty fine if they raise their prices to Medicare faster than inflation.
There will be more subsidies for the Affordable Care Act, which basically means more people will have access to insurance.

As pharmacists, pay attention to the fine print of those things. Points 1 and 2 apply to Medicare patients only. Point 1 doesn’t go into effect until 2025. If you work in the retail pharmacy setting, be prepared to explain these fine points to patients who have questions.

The tl;dr of how the 2022 Inflation Reduction Act impacts pharmacy

With the passage of the 2022 Inflation Reduction Act, Medicare gained the ability to negotiate drug prices with pharmaceutical companies. Even though this negotiation power is technically only being extended to Medicare and there’s a stair step timeline for implementation, it’s likely that the effects of these negotiations will trickle down to patients covered by other payers.

There are also still multiple lingering questions about how particular provisions will be executed, including reimbursement to patients for overages paid at the register as well as insulin and vaccine regulations. In the meantime, we pharmacists will have to do our best to explain what we can to our patients at the pharmacy counter!

The tl;dr of the tl;dr? Stay tuned to the news to see how some of these details play out!

What Pharmacists Need to Know about the 2022 Inflation Reduction Act and Drug Pricing