Cheaper Medicare drugs bound for Michigan. By how much? It’s complicated

• Ten Medicare drugs — many of them prescribed for common conditions such as diabetes — will soon be cheaper for some Michiganders
• It’s because of the Inflation Reduction Act passed in 2022. Savings begin in 2026
• How beneficiaries will see those savings isn’t yet clear

Federal negotiations with drugmakers on 10 life-saving medications will save the nation’s Medicare program about $6 billion a year, with one drug being slashed to about one-fifth of its list price and another to a quarter of the list price.

The White House this week announced the new prices on medications taken by about 8.8 million Americans to treat, among other conditions, diabetes, psoriasis, heart failure, and certain blood cancers.

But just how these yearly savings will flow into the pockets of Michiganders isn’t yet clear, said Carrie Germain, the pharmacy consultant to the Michigan Association of Health Plans.

“It’s very complex, and it'll be very interesting how that cost flows through down to the pharmacy and from the pharmacy to the consumer,” she said.

Here are the basics, according to Germain, news reports, the nonprofit research group KFF, and White House statements.

Who’s eligible for the savings?

The new prices affect Medicare beneficiaries with drug coverage. Nationally, those beneficiaries will share in about $1.5 billion in out-of-pocket savings.

It’s a segment of the population that often takes drugs for multiple conditions. 

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While most older adults say they are able to afford the medications they need, that is less so the case with individuals who need multiple prescriptions, according to a 2023 poll by the health care research nonprofit, KFF. In that poll, about 3 in 10 respondents reported skipping or otherwise not taking their drugs as directed because of the costs.

The cost savings negotiated by the federal government affect a minority of that nation’s insured however; savings don’t directly affect those who get drug coverage through an employer, Medicaid, or plans purchased on the federal marketplace.

What drugs will be cheaper?

The negotiated prices, released by the Biden administration Thursday, show deep discounts from the drugs’ list prices. 

For example, a 30-day supply of Januvia, used to treat diabetes, dropped 79%; likewise, the cost of a NovoLog pen, also used for diabetes, dropped 76% from its list price.

Why is this happening?

The savings mark the first year in which the U.S. Centers for Medicare and Medicaid Services was able to negotiate such costs under the Inflation Reduction Act of 2022. 

Already, the act has forced a $35 cap per month on insulin products for Medicare beneficiaries. Also under the law, certain adult vaccines — those approved for adults by the U.S. Centers for Disease Control and Prevention’s Advisory Committee for Immunization Practices (ACIP) — are free to people with Medicare prescription drug coverage. That includes the shingles vaccine, which has often required some copay or other cost-sharing.

Additionally, drugmakers whose prices grow faster than the rate of general inflation must pay Medicare a rebate to cover the difference.

The pharmaceutical industry has argued that the cost containment effort threatens future drug development and access to other drugs.

So how much will I save?

Medicare plans will be required to cover each of these 10 drugs for their beneficiaries and to pass along drug savings to the consumer. But then it gets complicated.

Formularies — a plan’s list of covered drugs and their pricing — vary from plan to plan as do the plan designs, themselves. For example, one Medicare beneficiary may pay a flat copay — say $10 of the cost of a drug, while a neighbor on a different plan might require a percentage through “coinsurance” — say 25% of the cost of the same drug.

Plans often negotiate lower prices still.

And the pass-through of savings may not be obvious. For example, this year, people who take Eliquis may pay a $40 copay each month, but it’s unlikely the cost simply will be reduced to $22.40 because of the 56% savings the feds negotiated for that drug. Rather, those savings might be somehow reflected, for example, in the cost of next year's monthly premium.

But this is equally important: Starting Jan. 1, no one with Medicare prescription drug coverage will pay more than $2,000 in 2025 for their drugs under the 2022 law.

“It’s good news, in that our Medicare system is saving money by paying less for drugs, but how those savings will be passed down to the individual patient is still unclear because plans vary and patient copays vary,” said Patricia Kelmar, health care campaigns senior director at Public Interest Research Groups, or PIRG, a consumer advocacy group that had lobbied Congress to approve drug negotiations.

When do new prices take effect?

Negotiated prices go into effect in 2026.