Medicare Advantage Plans Allowed to Negotiate Drug Prices

Drew Thies

Under a new policy announced by the Trump administration, insurers which offer Medicare Advantage plans will be able to directly negotiate with drugmakers in an effort to reduce prices.

The Centers for Medicare and Medicaid Services (CMS) said Medicare Advantage plans will be allowed to require that patients first try certain lower-cost drugs before moving to a more expensive alternative if the first treatment is not effective.

Until now, insurers were not able to negotiate prices under Medicare Part B and Part D, which are administered in a hospital or doctor’s office. In 2017, Medicare Advantage plans spent $11.9 billion on Medicare Part B drugs.

Secretary of Health and Human Services Alex Azar said, "By allowing Medicare Advantage plans to negotiate for physician-administered drugs like private-sector insurers already do, we can drive down prices for some of the most expensive drugs seniors use."

According to CMS Administrator Seema Verma plans will be required to pass on to patients more than half of the savings generated from the negotiations. Patients can receive benefits in the form of gift cards and other rewards programs.