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A snappy from the conservative advocacy group bluntly charges Sen. Joe Manchin (D-W.Va.) with supporting a legislative plan that would drain 鈥渂illions in funds鈥� from Medicare.

Specifically, the ad claims that Manchin and AARP, the well-known advocacy group for people 50 and older, 鈥渟upport government price-setting schemes that鈥檒l give liberal politicians billions in funds meant for Medicare to spend on unrelated government programs or pad big insurers鈥� profits.鈥� Here, 鈥減rice-setting鈥� is a reference to a policy proposal that its backers say would give Medicare the ability to rein in the prices it pays for some prescription drugs so they are more in line with prices in other industrialized countries.

American Commitment didn鈥檛 respond directly to KHN鈥檚 request for comment, but its president, Phil Kerpen, to our email inquiry. Kerpen tweeted on July 14 that 鈥淐BO shows Manchin/Schumer drug price controls raid Medicare for $287 billion, most of which is expected to be sent to insurance companies as supersized Obamacare subsidies.鈥�

This is a reference to the of the prescription drug policies in an economic package 鈥� a type of legislation known as a 鈥� that Senate Democrats, led by Majority Leader Chuck Schumer, hope to bring to the floor in the coming weeks. The CBO found those policies would save $287.6 billion over 10 years as a result of Medicare鈥檚 reduced spending on drugs. More on this later.

Both Manchin and AARP dismissed the ad鈥檚 message.

鈥淭his ad funded by Big Pharma is blatantly lying about Sen. Manchin鈥檚 record,鈥� said Sam Runyon, Manchin鈥檚 communications director. 鈥淲est Virginia seniors know Sen. Manchin has worked tirelessly to protect Medicare and reduce prescription drug costs.鈥�

American Commitment received from PhRMA, the drug industry鈥檚 trade group, in the 2020 election cycle, according to .

In the days after the ad began airing, he would support only a slimmed-down version of the reconciliation bill, although his support for Medicare drug-price negotiations has remained steady.

Bill Sweeney, AARP鈥檚 senior vice president of government affairs, said the ad is representative of 鈥渢he false attacks鈥� that opponents of the proposal are using. 鈥淪o I don鈥檛 think anything can be further [from] the truth,鈥� he said, referring to the ad鈥檚 assertion that the Medicare program will be cut to pay for something else.

This ad is marked by charged language and opinions, and it raises the question of whether giving Medicare the power to regulate drug prices would be the price-setting scheme that American Commitment makes it out to be.

What Are Medicare Drug-Price Negotiations?

The ad claims that Manchin and AARP 鈥渟upport government price-setting schemes.鈥� And it鈥檚 true that Manchin and AARP continue to favor Medicare drug-price negotiations.

So what does that mean?

Medicare is currently prohibited from bargaining directly with pharmaceutical companies over how much it pays for certain prescription medications, so that power would be new. Supporters of the proposal say doing so would lead to significant savings for Medicare because it pays much higher prices than the rest of the world. Critics of the proposal, such as Kerpen, call the practice 鈥減rice setting.鈥�

The reconciliation bill鈥檚 Medicare drug provisions would allow the program to negotiate drug prices for a limited set of drugs 鈥� 10 initially and another 10 in later years 鈥� and would cap drug price inflation. The a $2,000 limit on annual out-of-pocket drug costs for Medicare beneficiaries. Companies that opt out will face an excise tax on the previous year鈥檚 profits.

, a senior fellow and health care scholar at the , said an argument can be made that even though the drugmakers and the government would hold discussions about setting lower prices for certain drugs, the program would compel drugmakers to comply or face tax penalties.

鈥淭he manufacturers will have no leverage at all 鈥� this is a law that gives [the Centers for Medicare & Medicaid Services] the authority to set the price,鈥� Antos said. 鈥淭here will be discussions, and, of course, it鈥檚 polite to call it negotiation,鈥� he added, but ultimately the government will make the decision.

Medicare Savings or Cuts? Common Washington Spin

Historically, both Republicans and Democrats, as well as the advocacy groups aligned with them, have framed as a when trying to gain traction with voters.

In this case, though, the drug pricing experts we consulted unanimously agreed that, from a budgetary standpoint, the almost $288 billion estimate from the CBO represents savings for Medicare, rather than funds that would be taken away from the program, as the ad alleges.

鈥淲hat鈥檚 happening here isn鈥檛 an elimination of a Medicare service or benefit 鈥� we鈥檙e talking about paying lower prices for the very same drugs we pay the highest prices in the world for now,鈥� said , a law professor and drug pricing expert at Washington University in St. Louis.

鈥淪o, I鈥檇 say that鈥檚 fairly misleading,鈥� Sachs said.

Indeed, if Medicare pays less for drugs, that could have a beneficial trickle-down effect, said , a senior fellow with the . That鈥檚 because, under this scenario, Medicare premiums and cost sharing would also be reduced, saving beneficiaries money. The actual savings would probably vary, though.

Another common argument from the pharmaceutical industry is that if their revenue goes down, fewer drugs could be developed in the future. The CBO estimated that the drug-price negotiation provision would hinder about 15 new drug approvals over 30 years. Under current law, about 1,300 drugs would typically be approved during that same period, according to the CBO.

鈥淭here鈥檚 a lot of disagreement about how large those effects will be and whether we are talking about high- or low-value drugs,鈥� Fiedler wrote in an email referring to the reduced number of drug approvals. 鈥淭here is a potential trade-off here between lower costs for beneficiaries and fewer new drugs down the road, albeit nothing resembling a clear-cut case that Medicare beneficiaries will be worse off overall.鈥�

It鈥檚 also important to remember that these drug price negotiations would target only a small subset of drugs 鈥� 20, at most 鈥� although the legislation does target the most expensive single-source drugs, which could include some cancer drugs, blood thinners, and rheumatoid arthritis medication. Still, drug companies would be free to profit from the sale of their other drugs.

So, overall, the experts said the ad鈥檚 contention that drug price negotiations would negatively affect seniors is inaccurate.

Would Insurers Profit if ACA Subsidies Were Extended?

The ad also alleges that the billions of Medicare dollars saved would be spent by liberal politicians on 鈥渦nrelated government programs鈥� or to 鈥減ad big insurers鈥� profits.鈥�

Senate Democrats have said that the nearly $288 billion in estimated savings to Medicare would be used to offset the cost of other programs.

There鈥檚 no question that the $288 billion in savings would give 鈥淐ongress the ability to spend on something else in the same bill,鈥� Antos said. 鈥淏ut, again, this is not a revelation 鈥� this is how all legislation works. The ad makes it sound like it鈥檚 out of the ordinary, but it鈥檚 actually completely usual.鈥�

The Democrats鈥� earlier plan for the reconciliation bill included provisions related to climate change, energy, and tax policy. However, momentum is now behind the , which includes only a two-year extension of the enhanced premium subsidies for consumers who buy insurance plans on the Affordable Care Act marketplaces. The American Rescue Plan Act, which became law in March 2021, first increased those subsidies and made qualifying for assistance easier, but that help runs out at the end of this year. If the subsidies expire, millions of people will have to start paying much higher insurance premiums or could lose their coverage.

This point brings us to the ad鈥檚 claim about padding insurers鈥� profits 鈥� which Kerpen linked to extending the ACA subsidies. That鈥檚 not true, according to the experts.

鈥淚nsurers might capture a little bit, since they would earn their ordinary profit margins on new enrollment,鈥� Fiedler said. But 鈥渢hose effects will be small relative to the amounts of money involved.鈥�

The ACA also includes that stops insurers from profiting too much from marketplace plan premiums, said , a fellow in the Health Policy Center at the . And increases in enrollment would also come with a boost in medical claims.

Both Blumberg and Fiedler said framing the proposal to extend the subsidies as padding insurers鈥� profits is misleading.

Our Ruling

American Commitment鈥檚 ad claims that Manchin and AARP support 鈥減rice-setting schemes鈥� that will divert funds meant for Medicare to 鈥渟pend on unrelated government programs or pad big insurers鈥� profits.鈥�

As noted by the experts we consulted, the ad is not accurate. The Medicare drug pricing plan results in savings, not the diversion of funds from the Medicare program. The ad also distorts the fact that those funds would be used to support other initiatives 鈥� in this case, the ACA subsidies. It鈥檚 not an underhanded conspiracy but a regular part of the reconciliation process. Additionally, if the plan comes to fruition and ACA subsidies are extended, insurance companies are not likely to reap big profits if it comes to fruition. We rate it False.