Biden Cap On Drug Costs Will Save Seniors Over $1,000 Annually

Photo: Reuters/Ken Cedeno

WASHINGTON, DC (REUTERS) – More than 1 million people in the US. will save over $1,000 a year beginning in 2025, when an annual $2,000 cap on prescription drug out-of-pocket costs kicks in, the leading lobbying group for older Americans said on August 28.
The cap, introduced as part of President Joe Biden’s Inflation Reduction Act, applies to the Medicare program for people aged 65 or over and those with disabilities. Its prescription drug component, known as Part D, provides coverage for around 56 million people.

AARP, which lobbied in favor of the law, commissioned health consultancy Avalere to conduct a study on the new benefit and published a report on the findings on August 28.

The $2,000 cap will lower prices in 2025 for more than 3.2 million people, or around 8.4% of Part D beneficiaries who do not receive other subsidies, AARP said in its report.

That represents a stark change from how Medicare Part D previously worked. Before the Inflation Reduction Act, beneficiaries who did not qualify for low-income subsidies were required to pay 5% of drug costs regardless of how much they had already paid.

The cap is expected to provide long-term savings, particularly for those most in need, even if Part D premiums rise next year as expected, Leigh Purvis, an AARP prescription drug pricing expert, said during a press briefing.

By 2029, the lowered cap will help 4.1 million people, or around 9.6% of beneficiaries, AARP said.

The biggest impact will be felt by those who use high-priced, branded drugs the most.

Diana DiVito, 82, said the cost of the treatment she takes for chronic leukemia has averaged $858 per month over more than five years.

Her co-insurance was 33% of the drug’s cost until she reached the Part D cap of several thousand dollars. After that, she still had to pay 5% of the drug’s cost, DiVito said. In 2024, the law eliminated that additional payment.

“When I saw the first co-pay, I almost had a heart attack,” DiVito, an AARP member, said during the briefing. “It’s a tremendous weight off my shoulders and I’m incredibly grateful.”