Economic Grand Rounds: Potential Effects of the New Medicare Drug Benefit on Pricing for Psychotropic Medications?

The new Medicare Part D prescription drug benefit created by the Medicare Modernization Act of 2003 (MMA) will have sweeping effects on how prescription drugs, including psychotropic medications, are financed for seniors and individuals with disabilities. The MMA relies on private Part D plans to control benefit costs by negotiating discounted prices with drug manufacturers and using pharmacy management tools common in the private sector, such as tiered formularies, to control drug use and spending. However, the MMA may not result in large overall price discounts or cost savings for psychotropic medications because of unique characteristics of many of these drugs. Also, concern exists that the legislation could result in higher Medicaid prices for those not in Medicare and lower investment in research and development for psychotropic drugs in the future. In this column we describe key features of the new benefit and discuss these concerns. PMC ID: PMC1403293 (September 2005)