ICYMI: Medicare “Delinking” Does Not Result In Savings, Increases Costs For Seniors And Taxpayers

As a so-called “delinking” measure continues to be discussed in Congress, specifically in the Medicare Part D program, it’s important lawmakers understand that this policy does not actually reduce costs in any way. Members and staff need to ask themselves, does this actually save consumers money and lower the costs of prescription drugs.

  1. A recent article in Axios highlights, “To make the math work and get a favorable CBO score, “delinking” has to be connected to transparency measures like requiring PBMs to disclose the cost and reimbursement of drugs and any fees or discounts involve.” The article also notes that, “One health lobbyist told Axios that congressional committee health staff have been warned by the CBO that the Medicare delinking policies don’t save money unless they are attached to the transparency measures.”See the full Axios article HERE.

  2. In addition, a recent op-ed from Ike Brannon, senior fellow at the Jack Kemp Foundation, in RealClearMarkets, debunks claims that “delinking” would result in savings for Medicare beneficiaries. Brannon writes:“The inefficacy of de-linking is not new: CBO has never directly released a score of de-linking in Medicare Part D, but it has scored larger bills that included, among other things, de-linking in Medicare Part D where the sum of its provisions would lower the deficit. It seems that committee staff extricated a score from that other analysis and applied it to this bill.“But that is not how scoring works, and CBO will, I suspect, inform the committee at some point that their bill is not truly revenue-neutral. Which is good, because we don’t want an incorrect idea like de-linking costs the government money incorrectly ratified by Congress.”Read Brannon’s op-ed HERE.

  3. According to a report by University of Chicago Professor of Economics, Casey Mulligan, the “delinking” policy would undermine incentives for pharmacy benefit companies to maximize competition in the market and secure savings for patients and health plan sponsors, resulting in higher drug prices and handing drug companies a profit-boosting windfall. The report found that the consequence of prohibiting linkages between pharmacy benefit companies’ compensation and prescription drug list prices in Medicare Part D would mean increased health care costs and increased Big Pharma profits.

Mulligan’s analysis finds:

  • Financial Windfall for Big Pharma: The “delinking” policy has the potential to significantly increase drug prices, reduce drug utilization, and redistribute billions of dollars annually from patients and taxpayers to pharmacy companies and drug manufacturers. The result would be approximately an additional $10 billion every year for drug companies, while costing patients and payers up to $18 billion.
  • Taxpayers Pay More for Medicare: Annual federal spending on Medicare Part D premiums would increase $3 billion to $10 billion.
  • Higher Premiums for Seniors in Medicare Part D: Reducing the negotiated rebates and discounts PBMs pass to health plans to lower drug costs for patients and health plans could lead plans to raise premiums to finance drug benefits. Eliminating the pay for PBM performance incentives could also reduce insurance coverage and appropriate drug utilization as costs for patients rise.
  • Reduces PBM competition: Introducing a new obstacle between buyers and sellers (in this case between health plan sponsors and PBMs) is unlikely to increase competition or new entrants in the PBM market or improve patient welfare.

Read Mulligan’s full analysis HERE.

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