Medicare Drug Prices

By George W. Chapman

The Inflation Reduction Act has already capped insulin at $35 a month for seniors on Medicare. In 2025, out-of-pocket costs for prescriptions will be capped at $2,000 a year. These alone will save members $1.5 billion a year. The Centers for Medicare and Medicaid Services (CMS) is just about done negotiating pricing with drug manufacturers for the first 10 drugs under the Inflation Reduction Act. The reduced prices will be in effect 2026. CMS will begin round two of price negotiations for another 15 drugs effective 2027. These savings on just 25 drugs will be in the billions for CMS and Medicare recipients. Part D premiums will decrease next year from 2024 levels. For advantage plan members, the average monthly premium will decrease from $18.29 to $17. For Medicare members with traditional coverage, the average monthly premium will decrease from $41.63 to $40.

We Pay More. Way More

While CMS finally negotiates drug prices for over 60 million Medicare recipients, commercial insurers that cover employees are on their own. Drug manufacturers are free to charge whatever they want. A senate committee recently grilled the CEO of Novo Nordisk, maker of Ozempic for Type 2 diabetes and Wegovy for weight loss. The difference in pricing between the U.S. and other countries is sickening if not criminal. In the U.S., Ozempic costs $969 a month. Yes — a month. It’s $59 in Germany; $71 in France; $122 in Denmark; and $122 in Canada.

In the U.S., Wegovy costs $1,349 a month. Again. A month. It’s $92 in the UK; $137 in Germany; $186 in Denmark; and $265 in Canada.

When pressed by the committee why, the CEO skirted the question and tried to put the entire blame on PBMs or pharmacy benefit managers. Really? While PBMs are another problem altogether, they are in no way accountable for the absurd differences in costs, (PBMs “negotiate” prices for their clients. But they get a payment of around 74 cents for every dollar eventually charged by Novo Nordisk. So, there is sort of a perverse incentive against negotiating a really low price. The FTC has released a damning report on PBMs.) The Novo Nordisk CEO absolutely knows the real reason why we pay so much more in the U.S. He just didn’t want to admit it. All the other countries have national health and negociate prices for every drug covered, including Ozempic and Wegovy, by their national plans for every citizen. Not just 10 prices for their seniors. I’m sure there were a few senators on the committee sheepishly looking at their hands because they accept money from the ubiquitous and wealthy drug lobby.

Everyone at the hearing knew exactly what the answer was. And until we have a national plan, the drug lobby will grease palms and we will continue to be ripped off by drug manufacturers and PBMs.

ACA Premium Tax Credits

Over 12 million of us purchase health insurance on the exchange. Premiums are discounted based on federal poverty guidelines. As an incentive to buy insurance, qualifying households are eligible for a premium tax credit. The average is about $800. The tax credit will expire next year. There is a bill in congress that would make the tax credit premium for fear people will drop coverage without it. Overall, 45 million of us are covered by the ACA.

CVS Conglomerate in Trouble

CVS ventured outside its pharmacy “lane” or area of expertise when it expanded into primary care clinics, pharmacy benefit management (Caremark) and insurance (Aetna Medicare) among other things. Their multifaceted business model intended to offer easy accessible, low cost, integrated care. As with many corporations, rapid over-diversification can lead to its downfall. CVS stock had fallen 20% from last year while the rest of the S&P has risen 21%. Industry experts surmise the negative press associated with PBMs and lower profits in their Medicare product could put both businesses on the chopping block.

Employers Look to Cut Costs

Who isn’t? While Medicare is tackling costs via the Inflation Reduction Act and reducing premiums for seniors, employers must face cost reduction on their own. Premiums for commercial insurance could increase anywhere between 7% and 9% next year which means the U.S. will retain its ignominious lead in average per capita cost at $16,000. A recent survey found most employers are looking to cut costs thereby limiting cost shifting to their employees. A third of employers, however, say they will continue to shift costs to their employees via premium contributions, higher deductibles and higher copays. Twenty-one percent will offer drug discount cards and direct to consumer prescriptions and delivery. Forty-three percent will bid out their health plan. Thirty percent plan to explore narrower networks. Thirty-eight percent will reevaluate employee assistance programs like mental health. The top area of focus for all employers is drug costs, especially for weight management, cardiovascular health, cancer and women’s health.

Hospital Star Ratings

CMS surveys our nursing homes and hospitals every two to three years. Hospitals receive a detailed report and must submit a plan of correction. Failure to improve can impact Medicare reimbursement. CMS uses a 5-star rating system. Metrics include quality, safety, staffing, etc. The average score for NYS hospitals is about 2.5 stars. Thirty-four of 133 NYS hospitals received one star. That’s 26%. The national average is 10%. You can look up a hospital or nursing home rating on Medicare.gov. I looked up hospitals in the broad region covering Watertown to Binghamton and Rochester to Albany. I didn’t find a 5-star facility. But I found four hospitals that received a 4-star rating: Guthrie in Cortland, Albany VA, St. Peter’s Albany and Cayuga Medical in Ithaca. All the other hospitals in the region received two or three stars.


George W. Chapman is a healthcare business consultant who works exclusively with physicians, hospitals and healthcare organizations. He operates GW Chapman Consulting based in Syracuse. Email him at gwc@gwchapmanconsulting.com.George W. Chapman is a healthcare business consultant who works exclusively with physicians, hospitals and healthcare organizations. He operates GW Chapman Consulting based in Syracuse.