No family should have to choose between life-saving medicine and buying groceries. Yet, prescription drug spending at pharmacies has nearly doubled over the last two decades, intensifying this struggle for many families.[i] Recent federal actions allowing prescription drug price negotiations in Medicare — a federal health insurance program for senior citizens and some people with disabilities or certain chronic conditions — are an important step forward for affordability that will benefit thousands of New Jersey families. However, millions who are not eligible for Medicare still need relief. Garden State leaders can build on the federal momentum by ensuring that, once the final appointments are made, the state’s Prescription Drug Affordability Council promptly holds its required public meetings to begin its critical work on data collection and legislative recommendations to improve affordability for all residents.
Recent Federal Actions Will Cut Prescription Drug Costs for Medicare Enrollees
Federal leaders have taken significant steps toward improved affordability by allowing negotiations of prescription drug prices for Medicare enrollees through the Inflation Reduction Act (IRA) of 2022. Previously, restrictions had prevented Medicare from pushing back on pharmaceutical companies’ price hikes.[ii] Other major steps in the IRA to address affordability in Medicare include capping out-of-pocket maximums for Part D (prescription drug) coverage and limiting the cost of insulin in the program to $35.[iii]
The first of the negotiated prices, announced in August 2024 and taking effect in January 2026, include 10 prescription drugs covered under Medicare, resulting in 38 to 79 percent in savings.[iv] Further, the IRA establishes a timeline for expanding these negotiations to cover even more drugs: 15 more drug prices from the prescription drug coverage in 2025, 15 from prescription drug and medical services coverage in 2026, and 20 more each year from 2027 onward. With each new list of drugs, the negotiated prices will become effective every other January — two years after for each new list, gradually increasing the number of drugs covered and providing increased cost relief for Medicare beneficiaries.[v]
Medicare Negotiated Rates Benefit a Majority of Senior Citizens, But Few Others
While these federal negotiations are promising, they only benefit Medicare enrollees — meaning that around 82 percent of New Jersey residents will not see cost reductions from the negotiated rates.[vi] Most Medicare enrollees in New Jersey are senior citizens, with 93 percent of residents who are 65 years old and older insured through the program.[vii] In contrast, only around 3 percent of working-age adults and 0.5 percent of children in the state are enrolled in Medicare.[viii] Consequently, the majority of children and working-age adults do not receive the affordability protections provided by these negotiated rates.
Although older adults are more likely to take multiple prescriptions and higher annual health care costs, younger residents with chronic diseases such as hypertension and diabetes also face significant financial strain from high drug prices. Across all age groups, many individuals are forced to alter how they manage their medications — such as cutting pills or forgoing prescriptions entirely — due to the unaffordable costs.[ix]
Empowering the New Jersey Prescription Drug Affordability Council Will Improve Affordability for All
To ensure affordability for all residents, New Jersey must fully activate its recently established Prescription Drug Affordability Council (PDAC). State leaders passed the prescription drug reforms, including PDAC, expecting them to “bring to light the inner workings and beneficiaries within the pharmaceutical industry and work to combat rising prices.”[x] However, leaders have been delayed in finalizing the last council members; in turn, this has prevented the scheduling of the council’s first meetings and collection of data.[xi]
State law directs the council to research the obstacles to affordability in the pharmaceuticals supply and demand chains, explore further state actions to improve affordability, and make recommendations regularly to the state legislature.[xii] Given the timeline needed to conduct this in-depth research, make the first policy recommendations, pass the policies in the legislature, and provide the departments time to establish new procedures and regulations, every day that delays the work means that relief remains out of reach for New Jersey families even longer.
Once the final members of the PDAC are appointed, they must move swiftly to hold public meetings and begin gathering the in-depth data needed for their work. By moving forward, state leaders will promote a more affordable future for all Garden State residents.
End Notes
[i] RAND Corporation, Prescription Drug Prices in the U.S. Are 2.78 Times Those in Other Countries, 2024. https://www.rand.org/news/press/2024/02/01.html. RAND estimates that retail prescription drug spending increased by 91 percent between 2000 and 2020.
[ii] Congressional Research Service, Negotiation of Drug Prices in Medicare Part D, 2022. https://crsreports.congress.gov/product/pdf/IF/IF11318
[iii] KFF, Explaining the Prescription Drug Provisions in the Inflation Reduction Act, 2023. https://www.kff.org/medicare/issue-brief/explaining-the-prescription-drug-provisions-in-the-inflation-reduction-act/
[iv] Centers for Medicare & Medicaid Services, Medicare Drug Price Negotiation Program: Negotiated Prices for Initial Price Applicability Year 2026, https://www.cms.gov/files/document/fact-sheet-negotiated-prices-initial-price-applicability-year-2026.pdf; KFF, FAQs about the Inflation Reduction Act’s Medicare Drug Price Negotiation Program, 2024. https://www.kff.org/medicare/issue-brief/faqs-about-the-inflation-reduction-acts-medicare-drug-price-negotiation-program/
[v] Centers for Medicare & Medicaid Services, Inflation Reduction Act: CMS Implementation Timeline, 2022. https://www.cms.gov/files/document/10522-inflation-reduction-act-timeline.pdf; KFF, FAQs about the Inflation Reduction Act’s Medicare Drug Price Negotiation Program, 2024. https://www.kff.org/medicare/issue-brief/faqs-about-the-inflation-reduction-acts-medicare-drug-price-negotiation-program/
[vi] NJPP Analysis of Census Bureau – American Community Survey, Table S2704, ACS 1-Year Estimates 2023. https://data.census.gov/table/ACSST1Y2023.S2704?q=S2704&g=040XX00US34
[vii] NJPP Analysis of Census Bureau – American Community Survey, Table S2704, ACS 1-Year Estimates 2023. https://data.census.gov/table/ACSST1Y2023.S2704?q=S2704&g=040XX00US34
[viii] NJPP Analysis of Census Bureau – American Community Survey, Table S2704, ACS 1-Year Estimates 2023. https://data.census.gov/table/ACSST1Y2023.S2704?q=S2704&g=040XX00US34
[ix] For discussion of annual health care spending, see: Centers for Medicare & Medicaid Services, NHE Fact Sheet, 2022, https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/nhe-fact-sheet#. For discussion of prescription drug affordability across adult age groups, see: KFF, Public Opinion on Prescription Drugs and Their Prices, 2023, https://www.kff.org/health-costs/poll-finding/public-opinion-on-prescription-drugs-and-their-prices/. For discussion of behaviors associated with high prescription drug costs, see: Healthcare Value Hub, New Jersey Residents Worried about High Drug Costs; Support a Range of Government Solutions, 2023, https://www.healthcarevaluehub.org/advocate-resources/publications/new-jersey-residents-worried-about-high-drug-costs-support-range-government-solutions-1.
[x] Quote from Senator Vitale, Chair of the Senate Health Committee. Office of Governor Phil Murphy, Governor Murphy Signs Legislative Package to Make Prescription Drugs More Affordable for New Jerseyans, 2023, https://www.nj.gov/governor/news/news/562023/20230710a.shtml.
[xi] Politico Pro, Assembly Speaker recommends AARP lobbyist for prescription drug council position, 2024. https://subscriber.politicopro.com/article/2024/04/assembly-speaker-recommends-aarp-lobbyist-for-prescription-drug-council-position-00154731; Politico Pro, Murphy makes long-awaited drug council appointments, 2024. https://subscriber.politicopro.com/article/2024/03/murphy-makes-long-awaited-drug-council-appointments-00148915
[xii] New Jersey Policy Perspective, The Best Medicine: How the Drug Affordability Council Can Advance Future Drug Pricing Reforms in New Jersey, 2023. https://www.njpp.org/publications/blog-category/the-best-medicine-how-the-drug-affordability-council-can-advance-future-drug-pricing-reforms-in-new-jersey/
