Medicare Part D and Negotiation

We all know Medicare Part D gives seniors and disabled Americans more choices and increased access to the medicines they need to lead longer and healthier lives. So how does it work exactly? And why does it work so well? Let’s revisit the benefits of Medicare Part D  and discuss some of its more nuanced components—like negotiation. Negotiation is a big reason why Medicare Part D is so successful. 

Q: Remind me— what’s Medicare Part D again?

A. Medicare Part D, also called the Medicare prescription drug benefit, is a federal government program that provides affordable prescription drug coverage to more than 40 million people seniors and Americans with disabilities. Through components like the non-interference clause, Part D effectively offers market-driven competition and an array of coverage options to keep people healthy.   

Q: What do you mean by ‘non-interference?’

A. The non-interference clause allows drug manufacturers and pharmacies to discuss pricing without government involvement. It also prohibits the U.S. Secretary of Health and Human Services from becoming involved in the negotiations between insurance plans and drug manufacturers. The clause specifically ensures that we can’t apply a ‘one-size-fits-all’ solution to an entire program, so that each beneficiary receives the care that best fits their needs. 

Q: What does ‘non-interference’ have to do with ‘negotiation?’

A. Everything. Allowing unobstructed communication between drug manufacturers and insurance companies that offer Medicare Part D plans yields unhindered arbitration. Negotiation drives competition and, as we know, competition propels the innovation ecosystem.  

Q: What does negotiation look like under Part D right now?

A. It looks pretty good! Part D purchasers work to provide discounts and rebates by negotiating prices with drug manufacturers. And, because Part D covers around 60 to 120 million people, purchasers have significant negotiating power. This translates into lower costs across a range of medicines.

As we look to the future of Medicare Part D, it’s important to remember the program’s success. Negotiation, as it exists under Part D right now, is an important and effective system for both beneficiaries and taxpayers. It’s one that works, and works well. As a driver of both access and innovation, Medicare Part D is a system we should strive to keep for today and generations to follow.