Here’s One Way Washington is Moving to Slash Seniors’ Prescription-Drug Costs

Amid legislative gridlock, regulatory change would address pharmacy price concessions that jumped 107,000% in a decade to $9.5 billion annually.

While drug-pricing reform legislation is stuck in Washington gridlock, a federal regulator is pushing forward reforms that could slash many seniors’ prescription-drug costs as soon as next year.

A proposed rule issued last week by the Centers for Medicare and Medicaid Services would require Medicare prescription-drug plans to pass along price concessions they get from pharmacies to consumers at the pharmacy counter. 

The rule change would trim Medicare beneficiaries’ costs by about $21.3 billion over 10 years, CMS estimates.

“It’s about time,” Antonio Ciaccia, CEO of drug-pricing research nonprofit 46brooklyn Research, said of the proposal. The pharmacy price concession issue, he says, “has been one of the festering wounds” within the Medicare Part D prescription-drug benefit.

The price breaks, which Part D plan sponsors and pharmacy benefit managers recoup from pharmacies after the point of sale, have skyrocketed in recent years. Pharmacy price concessions jumped more than 107,000% between 2010 and 2020, to $9.5 billion, according to CMS. Currently, Medicare beneficiaries’ out-of-pocket drug costs are typically based on prices that don’t factor in those concessions—and that means they’re paying amounts that are “increasingly inflated relative to reality,” Ciaccia says.  

Under the price-concession arrangements, negotiated between pharmacies and Part D plan sponsors or their PBMs, the amounts recouped from pharmacies after the point of sale are often tied to certain performance metrics, such as patients’ medication adherence. The Pharmaceutical Care Management Association, a trade group for pharmacy benefit managers, says the pharmacy price concessions are designed to improve quality and safety for Medicare beneficiaries. “We look forward to working with CMS on ways to enhance the use of value-based contracting rather than limiting this important tool,” the trade group’s president and CEO JC Scott said in a statement.

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