Mehmet Oz recently took the reins as the new head of the Centers for Medicare & Medicaid Services (CMS), which oversees health coverage for nearly half of Americans. He will be responsible for overseeing the drug-price negotiations with the agency’s pharmaceutical manufacturers. The goal of these negotiations, created by the 2022 Inflation Reduction Act, is to reduce the cost of prescription drugs for the government and Medicare beneficiaries.
This sounds like a win for patients. The reality is more complicated — and potentially harmful. Unless policymakers intervene, these well-intentioned reforms could raise costs and limit access.
Two asthma medications are among the 15 drugs recently selected for Medicare price-setting. That’s no small matter — one in six Americans with asthma struggles to afford their prescriptions. At the Asthma and Allergy Foundation of America, we hear from patients worried about access and cost.
The IRA’s drug-pricing provisions are layered onto Medicare’s “Part D” benefit, which provides prescription drug coverage to 53 million Americans. Crucially, while Part D is publicly funded, it’s administered by private insurance companies. Each plan has its covered drug list — or formulary — organized into cost tiers that determine what patients pay out of pocket.
Here’s the kicker: The IRA requires that all Part D plans cover the negotiated drugs, but it does not specify where those drugs must be placed on formularies.
This gives insurers and the pharmacy benefit managers they contract with plenty of room to maneuver. Plans may place price-negotiated drugs on higher-cost formulary tiers, impose burdensome “utilization management” policies, or steer patients toward higher-priced alternatives that offer the insurer or pharmacy benefit managers bigger rebates.
Nothing in the IRA explicitly prohibits these practices.
Prior authorization is one example. Insurers and pharmacy benefit managers can require extra approvals for medications, even those whose prices have been negotiated by CMS. These hurdles delay or block access to the medications patients and doctors prefer. For asthma patients, where the right medication or combination of medications can vary significantly from person to person, losing access to the right drug isn’t just inconvenient — it can be life threatening.
CMS has acknowledged these risks. The agency has been slow to act — despite recent polling showing that up to 70 percent of insurers plan to increase their use of prior authorization because of the IRA.
Price negotiations could also jeopardize access in other ways. Independent pharmacies face new financial risks under the program. A recent survey by the National Community Pharmacists Association found that 93 percent of independent pharmacies are either planning or considering not stocking some of the initial price-negotiated drugs. Why? The new payment structure could delay reimbursements, cut into margins, and disrupt weekly cash flow — challenges small pharmacies are often ill-equipped to absorb.
If pharmacies stop stocking these drugs, then lower negotiated prices won’t help patients who can’t fill their prescriptions.
Medicare can and should use its existing authority to ensure that private plans and pharmacy benefit managers don’t manipulate formularies to raise costs or restrict access to the drugs the IRA is supposed to make more affordable. CMS can also fix the payment system so independent pharmacies can afford to carry the drugs.
Patients deserve real savings and real access. Unless Congress and CMS act, Medicare’s drug price reforms may end up hurting the people they’re supposed to help. Dr. Oz can and should address the IRA’s unintended consequences.
