The Department of Health and Human Services is about to publish the final prices for 10 prescription drugs that Medicare covers, following negotiations between the federal government and the pharmaceutical manufacturers. The drugs include expensive, widely used blood thinners and diabetes treatments, as well as a cancer therapy medication.
Such negotiations are routine in most other economically advanced countries ― it’s the way their governments set drug prices — but they have never before taken place in the U.S. That’s changing this year thanks to the Inflation Reduction Act, which Democrats passed on a party-line vote and President Joe Biden signed into law last year.
I think private insurance usually pays more than Medicare (because Medicare is massive, used by people frequently needing health services, and the government can use that leverage to set prices), but whatever negotiated price information they release will be a new anchor for private insurance costs. The private insurances probably aren’t going to pay $700 when the government pays $55.
There’s also a political incentive for the insurance companies to not look significantly worse than Medicare lest they boost support for Medicare-for-All or a public option.