The top three of the ten drugs on the widely anticipated list include Eliquis, a blood thinner; Jardiance, which treats diabetes and heart failure. Xarelto, another blood thinner. Medicare cost $16 billion, $7 billion, and $6 billion, respectively, last year.
Drugs can be targeted for price negotiation if they are available under Medicare drug benefits, lack certain price-cutting competition, and have been sold for at least several years to give drug companies time to help recover their development costs.
Tuesday’s move to lower Medicare drug prices was an important component of last year’s Reducing Inflation Act, an act that President Biden and his aides are heralding as a political victory, though the number of drugs and the timing of the first price cuts — 2026 — are unclear. Less ambitious than some Democrats have sought for many years. The fate of the entire negotiating scheme rests with the courts because six drugmakers, the Chamber of Commerce and the drug industry’s main trade group have filed separate lawsuits across the country trying to block it.
Still, the Biden administration, Democratic allies in Congress, and consumer healthcare advocates have portrayed this initial 10-drug list as a milestone to shore up Medicare’s financial stability and ease the burden on beneficiaries. Medicare is the federal insurance system for people who are at least 65 years old, Together with younger adults who have disabilities. When the law was passed last year, the Congressional Budget Office projected that the negotiations would save the program just over $100 billion over the next decade.
More than 60 percent of the 65 million people in Medicare take prescription drugs, and 25 percent take at least four prescriptions, according to a survey this summer by the KFF, a healthcare policy organization.
The rest of the list consists of Januvia, Farxiga, and NovoLog, which treat diabetes among other conditions; Enbrel and Stelara for arthritis and psoriasis. and Entresto, for heart failure. and Imbruvica to treat blood cancers.
Wall Street analysts have widely expected most of the 10 drugs selected for price negotiations to appear on the list, based on healthcare expenditures and sales in the United States, among other criteria. For seniors enrolled in Medicare, average annual costs ranged from $121 for the diabetes drug NovoLog to $5,247 for the cancer drug Imbruvica, including those receiving financial assistance. Finally, the Department of Health and Human Services estimates that about 9 million seniors enrolled in Medicare’s prescription drug program used one or more of the 10 drugs in 2022, paying a total of $3.4 billion out of pocket.
The 10 drugs identified on Tuesday represent the first wave of drugs designated for price negotiation, with the list expanding in coming years. For this initial batch, the manufacturers have until the beginning of October to agree to negotiate a price with the Centers for Medicare and Medicaid Services. If they did, companies would quickly need to disclose to CMS a set of data for each specific drug regarding revenue and what the manufacturer spent on research, development and production.
If a manufacturer refuses to negotiate or does not agree to what federal rules call a “maximum fair price,” the company will face a heavy tax or must opt out of Medicare and Medicaid, the nation’s largest public health insurance program designed for low-income people. income.
To be considered for price negotiation, the drug must not be competitive with a less expensive generic competitor, and a biologic drug—a class of drugs made from living organisms—must not compete with any cheaper version known as biosimilars. The number of drugs involved will increase slightly over the next two years, bringing the total number of drugs to 15 drugs in each of the next two years and 20 drugs in the following years. This year and next, the drugs are part of Medicare Part D, the drug insurance program created two decades ago. Then, it can come from Part D or Part B drugs, such as cancer treatments, that doctors administer.
Although Medicare drug price negotiation is limited, the arrival of Medicare drug price negotiation marks a sharp departure from the history of Medicare. When the program was created in the 1960s, it covered medications given in a doctor’s office – Part B – but excluded medications that patients took on their own. Although decades of efforts to add drug benefits to outpatients were incorporated into larger health reform proposals that failed, broader drug benefits did not become part of the program until a set of changes to Medicare were approved by Congress in 2003. Subsidies This law included language prohibiting any government role in negotiating drug prices. The Reducing Inflation Act of 2022 — known as the IRA — overturned that prohibition.
Since the outpatient drug benefits included in the 2003 law began three years later, Medicare beneficiaries have been able to get this coverage by purchasing a separate drug plan — through Part D — or as part of managed care plans, known as Medicare Advantage. In both cases, beneficiaries still pay some of the cost of obtaining the drugs, and the government has not affected the prices set by drug companies.
The pressure to negotiate prices has met stiff opposition from pharmaceutical companies, who argue that capping potential profits erodes their ability to invest in more research and development. After a rare loss on Capitol Hill, the industry and its business allies have turned to the courts, with the eight cases that could take years to resolve and could reach the Supreme Court.
If the negotiation process continues, industry analysts expect it to have a profound ripple effect. The rates negotiated and announced by Medicare can affect negotiations between commercial insurers and drug makers. In contrast, drug companies can focus on developing drugs with larger molecules — such as vaccines and gene therapies — that are exempt from potential Medicare price negotiations for longer than prescription pills.
It is difficult to predict the final effects of the law. Even the companies that criticize them admit that they could benefit from provisions that make their medicines more accessible to patients.
“The IRA is not all doom and gloom for biopharmaceuticals, because it will lower out-of-pocket costs for seniors.” Motivating patients to stay on them longer, according to analysts at Leerink Partners, a healthcare-focused investment bank. And some drugs initially intended for negotiation may not remain on the list for long, because they are set to lose their patent protection soon after the lower prices take effect, meaning they will face competition and no longer qualify for negotiated prices.
For the Biden administration, the inflation cut provision is the cornerstone of the battle to rein in drug prices, which it is fighting on several fronts.
By law, Medicare beneficiaries pay a maximum of $35 per month for insulin. Biden issued executive order Last year, he directed the Department of Health and Human Services to study new models to lower drug costs for Medicare and Medicaid beneficiaries. In May, the Department of Health and Human Services Suggest a rule This would give the Department and states more leverage to negotiate payment for the most expensive Medicaid-covered drugs. The Federal Trade Commission has taken a more aggressive approach to drug mergers, citing concerns about price increases when it sued in May to block Amgen from acquiring Horizon Therapeutics — even though the two companies are not directly competing.
As the impact of Medicare drug price savings unfolds over the years, negotiated prices may have a small impact on some drugs, including Eliquis, a blood thinner that cost Medicare $6.2 billion in 2021, far more than any drug. last. Eliquis, made by Bristol Myers Squibb and Pfizer, is set to lose patent protection in 2026, the year Medicare negotiated rates first go into effect.
“Whatever the impact is, it won’t be long-term on our portfolio,” Angela Huang, Pfizer’s chief commercial officer, said of Elequis on a call with financial analysts this month, according to a transcript compiled by S&P Global Market Intelligence.
Bristol-Myers Squibb said in a statement on Tuesday that Eliquis “was targeted for this program because of the sheer number of Medicare patients benefiting from the drug, not because of its price.”
For now, companies are already considering the effects of the law when formulating strategies to develop or acquire drugs. Novartis, for example, is looking for acquisitions where “we believe we have opportunities to either manage the impact of the IRA or avoid the impact of the IRA,” CEO Vasant Narasimhan said on an earnings call last month.