What's Happening?
A recent report by the consumer advocacy group Public Citizen highlights a change in Medicare's drug age calculation that has delayed price negotiation for AbbVie's drug Creon by seven years. This change, proposed to be made permanent by the current administration,
affects Creon, a pancreatic enzyme replacement product used by over 185,000 Medicare beneficiaries. The Inflation Reduction Act of 2022 allows Medicare to negotiate drug prices, but only after a drug has been on the market for a specified period. Creon was reclassified as a biologic in 2020, resetting its eligibility clock for price negotiation. This delay means Creon will continue to be sold at manufacturer-set prices, impacting Medicare's spending.
Why It's Important?
The delay in price negotiation for Creon has significant fiscal implications for Medicare, which funds Part D spending through premiums and general revenue. Drugs outside negotiation continue at higher prices, affecting both premiums and taxpayer contributions. The 40 drugs selected for negotiation accounted for 36% of Medicare's drug spending in 2024, totaling $125 billion. The delay in negotiating Creon's price means higher costs for Medicare and potentially higher premiums for beneficiaries. This situation underscores the tension between providing price relief and maintaining incentives for pharmaceutical research and development.
What's Next?
The proposed rule to make the change permanent is not yet finalized, leaving room for potential policy adjustments. Stakeholders, including beneficiaries and advocacy groups, may influence the outcome through public comments during the rulemaking process. The ongoing debate highlights the need for a balanced approach to drug pricing that considers both cost savings and the pharmaceutical industry's innovation incentives.
