The original language calculated the penalty based on prices in the Medicare and commercial markets, which would have created a financial disincentive for drugmakers to raise private sector prices.
But the new language excludes private sector prices from the calculation. Drugmakers might therefore be more willing to hike prices on products with low Medicare uptake and absorb the penalty if the private sector profits eclipse the loss, Cubanksi said.
“It still seems more complicated than straightforward in terms of how exactly this will play now that it no longer applies to the commercial market,” she said. “But I think on balance, there’s still some effect we can expect from the inflation provision on constraining price growth in the commercial market because of the way that the measure of price is calculated.”
About 12 percent of private health insurance spending in 2020 was on retail prescription drugs, on par with the past five years, according to the Centers for Medicare and Medicaid Services’ National Health Expenditure data.
Studies on the impact of inflation penalties in other drug programs show they help slow price increases for other payers, said Sean Dickson, director of health policy for West Health Policy Center, and the provisions in the reconciliation bill will likely have the same “positive spillover effect.”