The Biden administration released on Aug. 29, 2023, a list of the first 10 drugs that will be up for negotiations with pharmaceutical companies over their Medicare prices.

The drugs are purchased through Medicare Part D, a prescription drug coverage program for Americans ages 65 and older. The 10 medications accounted for more than US$50.5 billion in gross costs between June 1, 2022, and May 31, 2023.

Provisions authorizing these negotiations were part of the Inflation Reduction Act which Congress passed in 2022, allowing Medicare to negotiate drug prices for the first time. Pending successful negotiations, these changes would amount to what researchers estimated to be net savings of about $1.8 billion in 2026. The Congressional Budget Office projected an even bigger savings of $3.7 billion.

The top 10 list includes such drugs as Johnson & Johnson’s Xarelto, which treats blood clots, and Amgen’s Enbrel, which treats rheumatoid arthritis and psoriasis.

Negotiations are expected to begin in October and continue until August 2024, with lower prices going into effect in 2026.

Democrats have hailed the new law’s drug pricing provisions as game-changing. They’re likely to make the issue a centerpiece of their 2024 election campaigns. Democrats are further emboldened as public opinion polls show overwhelming support for the policy among Americans.

As a scholar who researches the politics of health policy, I’m skeptical that Medicare drug price negotiations will end up making as big a difference as Democrats have promised, at least in the near future. While U.S. prescription drug prices are excessive, the true potential of the policy is unclear, as it remains muddled in lawsuits and industry opposition. However, if it can withstand the ongoing attacks and become settled law, Americans ages 65 and up could see real financial relief down the line.

Cutting drug costs for Medicare enrollees

The Inflation Reduction Act allows the Centers for Medicare & Medicaid Services to negotiate prices with the companies that make some of the most expensive drugs in the Medicare program, including life-saving cancer and diabetes treatments like Imbruvica and Januvia.

If the negotiations proceed as planned, the drug-price-negotiation provision is expected to save the U.S. government about $98.5 billion by 2031 by allowing it to pay less on prescription drugs for Americans on Medicare – nearly 66 million people. The Biden administration hopes that these cost savings will be passed down to Americans 65 and older through reduced Medicare Part D premiums and lower out-of-pocket costs.

The Inflation Reduction Act provides additional benefits for older Americans, including limiting their out-of-pocket expenses for prescription drugs to no more than $2,000 annually, limiting the growth of Medicare Part D premiums, eliminating out-of-pocket costs for vaccines and providing premium subsidies to low-income people ages 65 and older.

The Inflation Reduction Act also includes a separate provision that requires drugmakers, under certain conditions, to provide the Medicare program with rebates if drug price increases outpace inflation, starting in January of 2023. That measure is expected to yield $71 billion in savings over a decade.

Penalties for companies that won’t negotiate

The 10 drugs that the Centers for Medicare & Medicaid Services have selected accounted for $3.4 billion in out-of-pocket spending in 2022 for Americans ages 65 and older and $50.5 billion, or about 20%, of total Part D gross prescription drug costs from June 1, 2022, to May 31, 2023.

Pharmaceutical companies have to sign agreements to participate in the upcoming negotiations by October 2023. Based on criteria such as public feedback and consultation, as well as the clinical value of the drug, the Centers for Medicare & Medicaid Services will make an initial price offer in early 2024, with the potential to further negotiate the price until August 2024. Going forward, additional drugs will be subject to negotiations.

If drugmakers don’t negotiate, they will face stiff penalties in the form of a tax, reaching as high as 95% of U.S. pharmaceutical product sales. Alternatively, the companies may pull their drugs from the Medicare and Medicaid markets, meaning that seniors on Medicare would lose access to them.

Why US drug prices are so high

Americans pay substantially more for prescription drugs compared with people who live in countries with similar economies, like Germany, the U.K. and Australia. While Americans spent more than $1,100 a year in 2019, Germans paid $825, the British paid $285 and Australians paid $434 per person.

The reasons for this disparity are multilayered and include the overall complexity of the U.S. health care system and the lack of transparency in the drug supply chain. Of course, many other countries also directly set prices for drugs or use their monopoly on health services to drive down costs.

For example, Dulera, an asthma drug, costs 50 times more in the U.S. than the international average. Januvia, a diabetes drug that is among the first 10 drugs up for price negotiation, and Combigan, a glaucoma drug, cost about 10 times more.

These costs impose a big burden on Americans – 1 in 5 of whom skip at least some of their prescribed medications due to the expense. Those 65 and older are particularly affected by these problems.

Strong resistance

It’s too soon to say how big the impact of the drug pricing provisions will be and whether this policy will be sustained.

Drugmakers have opposed any governmental regulation of drug prices for decades. They are fighting the measure in court and running a public relations campaign that warns of reduced investments in life-saving cures because their financial incentives are reduced.

Even if the drug price negotiations survive the industry’s legal challenges, it’s possible that future Republican administrations won’t embrace or enforce this policy. This is because potential Republican wins in the 2024 presidential and congressional elections could unravel or severely curtail the new drug negotiation policy. Indeed, Republicans have been working feverishly on designing a strategy to use the negotiations against Democrats in the upcoming elections.

Weighing the prospects

In my view, the government’s efforts to cut prices for prescription drugs that Part D enrollees obtain are a step in the right direction. For now, the effect will likely be small because patients already receive discounts on the listed drugs, bringing the net savings down substantially. However, the potential for real savings for Americans ages 65 and older will undoubtedly grow as more drugs become subject to negotiation.

At the same time, drug manufacturers have indicated that they are willing to take their legal battles against the Medicare drug pricing reform all the way to the Supreme Court. If that happens, there’s a good chance they will prevail because the arguments made in their lawsuits are likely to appeal to the Supreme Court’s conservative majority, which has been favorable to many of the arguments made by drugmakers in their lawsuits.

Moreover, drugmakers could also simply pull their drugs from Medicare and Medicaid to force the government’s hand. The Centers for Medicare & Medicaid Services seems to have deliberately chosen drugs that make up a high percentage of manufacturers’ drug sales to counter this possibility. The industry has a history of skillfully exploiting loopholes and possesses a vast lobbying apparatus.

It’s also too soon to know if this is going to be a win for American patients overall. It’s possible that Americans who aren’t covered by Medicare may actually see prices go up. That’s because if drugmakers do make less money on drugs for people enrolled in Part D, they might make up for those lost profits by charging more for drugs that other people depend on.

And lastly, it’s possible that there will be fewer new prescription drugs – as an indirect result of this policy that’s supposed to improve access to health care – because it may reduce drugmakers incentives. While the number of cases is likely small, it would potentially take a toll on patients who might have seen a cure to their disease – or some relief from their symptoms.

Simon F. Haeder, Associate Professor of Public Health, Texas A&M University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Maui County is suing Hawaiian Electric, claiming the utility was negligent for not shutting off power as strong winds hit the island in the hours before the city of Lahaina burned. While the cause of the devastating Aug. 8, 2023, wildfire is still under investigation, forecasters had warned that powerful winds were expected, and West Maui had exceptionally dry conditions that put it at high risk for wildfires.

In many cases, however, deciding to shut off power isn’t as simple is as it might sound. We asked Tim Lieuwen, executive director of the Strategic Energy Institute at Georgia Tech, about the risks and trade-offs utilities have to weigh in deciding how to respond during fire-risk conditions.

Why are utilities so often suspected in fires?

There are a lot of ways that utility lines, particularly high-voltage lines, can spark fires.

If tree branches are too close to the lines, electricity can arc between the line and the tree. Old equipment can set off sparks. If the weather gets really hot, power lines can sag and touch dry grass or trees. If there’s a lot of wind, that can push a power line into tree branches or damage equipment.

All of those can and have been fire-starters.

In California, a state audit found that electrical power caused 10% of all wildfires and was responsible for nearly 20% of all acres burned from 2016 to 2020. Those were also some of the most destructive fires in state history – including the 2018 fire that destroyed the town of Paradise. Pacific Gas & Electric pleaded guilty to 84 counts of involuntary manslaughter in that case and one felony count of unlawfully starting a fire.

Do utilities have a responsibility for fire safety?

That’s the question at the heart of litigation and debates.

Public utilities’ obligations can vary state to state. In general, regulated utilities have a duty to provide safe, affordable, reliable power to their customers. That can mean making tough choices.

Let’s say it’s really windy, dry and hot – ideal conditions for spreading a wildfire. The utility can shut off power, but that means people don’t have air conditioning in what may be extreme heat. People with health issues – who might need oxygen, for example – might not be able to run essential medical devices.

Electricity is critical infrastructure and a foundational bedrock to many other services. Cellphone service can be lost if transmission towers lack backup power, so when power goes out in a disaster, people could lose access to crucial information. Water pumps used in wells and water treatment also need electricity. Many municipal water systems have backup generators to keep water flowing, but small water systems might not.

Texas learned about cascading dependencies during the deep freeze in February 2021. When power systems failed, the pumps used to send gas and oil through pipelines went out. That meant power plants weren’t getting the gas they needed to operate.

Utilities have to balance the risk of keeping power on with the risks created by shutting power off.

What can utilities do to manage fire risk?

Utilities can make sure they’re careful about trimming trees, cutting grasses and removing other dry fuel that can ignite near power lines.

In really high-risk areas, they can move their lines underground. There’s an effort to do that in California, but estimates show it would be prohibitively expensive to take all high-voltage lines underground.

To give you a sense of the amount of line we’re talking about, in 2021, California utilities reported having nearly 40,000 miles of bare power lines in areas at high risk of wildfires.

Utilities are constantly actively looking for fire risks, whether it’s replacing old transformers or upgrading lines that might be overloaded or clearing away foliage.

Technology also helps identify risks. Sensors can detect sparks on a power line. Newer tools being tested aim to detect variations in electrical current that could indicate overloaded lines before sparks occur. On hot days, being better able to manage the distribution of power flow of electricity through power lines that are overloaded and potentially overheating could also help avoid problems along power lines.

Another solution is making architectural changes to the electricity grid, where rather than relying on large centralized power stations with high power, long distance transmission lines, power is produced closer to the consumer, ranging from community, to neighborhood, to one’s own home.

For example, rooftop solar and community solar projects can help reduce the need to add more high-voltage transmissions lines to carry power long distances and through high-risk wildlands. The architecture of the grid is rapidly evolving as both rooftop and community solar appear.

How do utilities balance the risks?

It’s easy to oversimplify this. Every solution, every choice, has an impact. You can shut off power during windstorms and largely eliminate the fire risk from power infrastructure. But it also has real consequences for people’s businesses, livelihoods and potentially their health and safety.

As an engineer, I can advise on the risks and develop solutions to minimize those risk through better detection, better equipment and by minimizing the need for lots of electrical lines. However, how to balance those risks and, in particular, address the issue of when a utility should shut off the power, is ultimately a societal choice.

Tim C. Lieuwen, Executive Director of the Strategic Energy Institute, Georgia Institute of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.