Medicare Update: Proposed Change Could Lower Drug Costs, AARP Report Shows
This proposal would require approval from Congress before it could be implemented.
A new AARP report suggests that expanding Medicare's prescription drug negotiation program could lead to significant cost savings and lower drug expenses for millions of seniors. By requiring pharmaceutical manufacturers to match the lowest prices paid for certain medications in comparable high-income countries, known as "most-favored-nation" pricing, Medicare spending on 10 high-cost brand-name drugs could be reduced by nearly $200 billion between 2029 and 2033. This proposal would need congressional approval before implementation.
Nancy LeaMond, AARP Executive Vice President and Chief Advocacy & Engagement Officer, emphasized the urgency of the issue, stating that drug companies have been charging Americans the highest prices in the world while forcing many older adults to skip or ration their necessary medications due to unaffordability. The Inflation Reduction Act already granted Medicare the authority to negotiate prices for specific high-cost medications, but AARP believes the program could be strengthened further to generate additional savings and control future Medicare Part D premiums.
The report examined ten expensive brand-name medications not yet selected for Medicare drug price negotiations, accounting for nearly $50 billion in Medicare spending in 2025 and used by over three million seniors. Applying the most-favored-nation pricing model to these drugs could cut projected Medicare spending from $273 billion to $76 billion during that period, according to the researchers.
However, some experts are concerned that such a proposal might not translate into lower out-of-pocket costs for seniors. Michael Ryan, a finance expert, argued that Medicare Part D coverage's $2,400 out-of-pocket cost cap would remain unchanged, regardless of price reductions, and that beneficiaries would still face higher premiums to offset the reduced drug costs. Nonetheless, AARP continues to urge federal officials to broaden the program while maintaining affordable Part D coverage for beneficiaries.
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