Will the Cost of Medicine Fall in Puerto Rico?

In 2020, the federal government promised “colossal savings for all Americans. And we’re talking about savings of 50, 60, 70 percent, 80 percent.”  In 2025, the president said, “I negotiated directly with the drug companies and foreign nations which were taking advantage of our country for many decades to slash prices on drugs and pharmaceuticals by as much as 400%, 500%, and even 600% — in other words, your drug costs will be plummeting downward.”  Recently, the White House announced, “All 50 states, the District of Columbia, and Puerto Rico are in, unlocking nearly $65 billion in Medicaid drug savings over the next decade — real relief for low-income families, children, seniors, and the disabled, and another big win for taxpayers.” So will the cost of medicine fall in Puerto Rico?

Medicaid

The Medicaid deal could make a big difference for Puerto Rico, where nearly half the population relies on Medicaid. Here’s how it works: drug companies provide voluntary discounts on certain brand-name drugs in the form of rebates to state and territory governments. Medicaid already gets steep discounts. So do Medicaid patients. Most pay a small copay or nothing at all for covered prescriptions; $4.00 is currently the maximum for brand-name drugs, with $1.00 the usual amount for patients who have a co-pay.

The copay for prescriptions is set by the Medicaid plan, not by the manufacturers of the drugs. There is no reason for those to change, so Medicaid patients’ cost of medicine is not expected to change.

That doesn’t mean that cost savings wouldn’t help Medicaid patients in Puerto Rico. The Medicaid program in Puerto Rico, unlike the program in the states, uses a capped block grant. Less funding is provided for Puerto Rico, and when it’s gone, it’s gone. The result of ongoing underfunding is limited healthcare for Medicaid recipients on the Island. If the deals with drug companies reduced costs for the territorial government, there might be more funding left over for other kinds of care.

However, the deals with the drug companies cover just “certain” brand-name drugs. Generics, which are usually chosen when price matters, are not included. The manufacturers can choose which drugs to include. The states and territories can then choose which of those drugs they will include in their programs. For example, weight loss drugs are an often-cited example of drugs likely to be covered by the president’s deals, but Puerto Rico does not cover these medications for Medicaid.

An additional problem for Puerto Rico is that the Medicaid program must pay the full discounted price for the drugs and wait for manufacturers to provide rebates to bring the net cost of the drugs down. Since Medicaid funding in Puerto Rico is capped, the territorial government has no flexibility on spending. Rebates may not arrive before the Medicaid block grant has been spent.

Other patients

People on the Island who are not covered by Medicaid might get discounts. If they have health insurance which covers their prescriptions, it is likely that the insurance companies will save rather than the consumers, just as with Medicaid.

Those who pay directly may pay less for certain drugs, if they find a source which can take advantage of the deal. One is TrumpRx. Ordinary pharmacies will not get the discounts or rebates. Since the voluntary discounts don’t apply to generic drugs, it is likely that generic forms of most medications will still be cheaper than the discounted name-brand drugs. Insurance company discounts may also make the name-brand drugs less expensive on the insurance plan than they are at TrumpRx. However, patients needing the covered drugs and paying out of pocket are likely to save money.

Will the cost of medicine fall?

At present, we can’t tell. The deals made with the drug companies are not public and there is no list of which drugs will be covered. Here are some complicating factors:

• The “Most Favored Nation” status means that the U.S. price of a drug is calculated on the basis of the prices charged for the drug in a list of eight countries. The next-to-lowest list price is the starting point. A calculation of the purchasing power of the U.S. is used on that next-to-lowest price to establish the price the drug company must match.  That gives the base price which the manufacturer must meet for TrumpRx, Medicare, and Medicaid. There is nothing to stop the company from raising its prices in other countries.
• The discounted prices are voluntary. Companies are being offered unknown incentives, but they do not have to maintain the discounts after they receive the incentives. They also can pick and choose which drugs they are willing to discount.
• States and territories still choose which drugs their Medicaid and Medicare programs will cover.

Overall, most consumers in Puerto Rico are not likely to see any lowered prices on their prescription medications. There may be overall benefits for the Medicaid program which could benefit patients on the Island. Time will tell. The inequity of the Medicaid program will not be addressed by this program.