Medicare Drug Price Negotiations May Not Reduce Patient Cost Sharing for Most Users of Targeted Drugs

Debra Lederman, Alexander L. Olssen and Mark Pauly

No 33889, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies two major changes in the financing of Part D drugs for Medicare due to the Inflation Reduction Act (IRA). Effective 2025 it capped out of pocket (OOP) payments at $2000 per year, and effective 2026 it will pay lower prices (negotiated by Medicare) for 10 targeted costly and effective drugs. This paper uses a large representative claims sample to explore the combined effect of these two provisions on the marginal cost sharing that affects beneficiaries’ access to these drugs. While many beneficiaries will be expected to see lower marginal OOP prices, we find that a majority of those using the targeted drugs will face either no change in their marginal OOP or, in a large fraction of cases, an increase in their dollar cost sharing per additional unit of use. This happens even when beneficiaries see reductions in their annual OOP cost because of the nonlinear nature of cost sharing in the Medicare Part D drug.

JEL-codes: G22 I13 (search for similar items in EconPapers)
Date: 2025-06
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