It’s been more than a decade since Medicare’s Part D was put into effect. For the unfamiliar, this optional program for Medicare health insurance holders covers prescription drug benefits.
If you’re one of the millions of people covered by Medicare, you’re probably already familiar with Part D. What you may not know is its effect on overall drug prices and the pharmaceutical industry in general.
According to research economist Gal Wettstein from the Center for Retirement Research, Part D has led to a decrease in drug prices as demand for them rose. However, there’s more to the issue than this seemingly positive effect.
The Dominance of Big Brands
The first important impact that Part D had is that after its implementation, branded drug manufacturers have been trying to keep their products off of generic drug brands’ production floor for longer.
Before, name-brand drug companies were granted patents lasting for as long as two decades or exclusivity grants which last for up to five years so they could protect the products they came up with.
However, the lengths of protection have been made longer by a strategy called evergreening. Through this, companies choose to pursue more approvals for additional features they may add on the original drug from the Food and Drug Administration. One such medication that underwent evergreening is Paxil, an antidepressant made by the British pharmaceutical giant GlaxoSmithKline.
In relation to this, makers of generic drugs, which are generally cheaper than their brand name counterparts, face more competition among similar drug companies. This could then lead to generic drug companies to be discouraged to produce their versions of a drug resulting in fewer choices for the consumer.
Eventually, this situation may just lead to consumers paying higher prices for their medicine with brand name companies having little competition in the market.
To address the issues left in the wake of the Part D implementation, Congress is reportedly working on laws to reform the prices of medication by the end of the current year. In fact, House Speaker Nancy Pelosi has already let the public know of a plan to lower drug prices through Medicare.
Still, experts remain on watch about how these reforms will affect the generic medicine market. According to Wettstein, lowering the profits of generic companies will only ‘mute’ the price decline in the long run. Thus, he advises seniors to consider taking older versions of their medicines to somewhat reduce their bills.