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Life Health > Long-Term Care Planning

PPACA: CBO Looks at Effects on Drugs

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The Affordable Care Act may not have much effect on the prescription drug prices private purchasers pay, according to Congressional Budget Office (CBO) Director Douglas Elmendorf.

Elmendorf comes to that conclusion in a letter he sent to Rep. Paul Ryan, R-Ill., the most senior Douglas Elmendorf Republican on the House Budget Committee.

Ryan asked the CBO to describe the possible effects of some provisions of the Patient Protection and Affordable Care Act (PPACA). and the Health Care and Education Reconciliation Act, the components of the Affordable Care Act package.

Provisions in the act will require manufacturers of brand-name drugs to provide new discounts and rebates for drugs purchased through Medicare and Medicaid. The amounts of the discounts and rebates will be based on the prices of the drugs.

“Manufacturers thus have an incentive to raise those prices to offset the costs of providing the new discounts and rebates, although other forces will limit their ability to do so,” Elmendorf says.

For drugs covered by Medicare, the Affordable Care Act could raise prices paid by pharmacies by about 1%, Elmendorf estimates.

For new drugs bought through Medicaid, the changes could increase prices paid by pharmacies by 4%, Elmendorf says.

“For people covered by employment-based health plans, CBO expected that net prices would probably not increase because those plans would be able

to negotiate larger rebates that roughly offset the higher prices paid by pharmacies,” Elmendorf says.

Affordable Care Act provisions also will change the rules for approving new “follow-on” biological drugs, and those changes should increase competition and lead to substantially lower prices for biological drugs. Those drugs account for only a small percentage of total drug spending, Elmendorf says.

Another act provision will impose an annual fee on manufacturers and importers of brand-name drugs.

“CBO expects that the fee will probably increase the prices of drugs purchased through Medicare and the prices of newly introduced drugs purchased through Medicaid and other federal programs by about 1%,” Elmendorf says.

Expansion of access to the Medicare Part D prescription drug program and eliminate of the “doughnut hole” coverage gap could also affect drug prices, by leading Medicare enrollees to buy more drugs, Elmendorf says.

“Given the intricacy of the mechanisms for setting drug prices and the numerous features of the health care legislation that affected those prices, CBO’s estimates of the effects of the legislation on drug prices were necessarily uncertain,” Elmendorf says. “The actual effects could be larger or smaller than CBO estimated.”


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