The Biden administration has unveiled the first 10 prescription drugs that will be subject to price negotiations between manufacturers and Medicare. The goal of this controversial process is to make expensive medications more affordable for older Americans. The Inflation Reduction Act, passed last year, allows Medicare to directly negotiate drug prices with manufacturers for the first time in its history. The agreed-upon prices for these drugs will take effect in 2026.
Here are the 10 drugs that will be included in the initial negotiations:
– Eliquis, made by Bristol-Myers Squibb, is used to prevent blood clotting and reduce the risk of stroke.
– Jardiance, made by Boehringer Ingelheim, is used to lower blood sugar in people with type 2 diabetes.
– Xarelto, made by Johnson & Johnson, is used to prevent blood clotting and reduce the risk of stroke.
– Januvia, made by Merck, is used to lower blood sugar in people with type 2 diabetes.
– Farxiga, made by AstraZeneca, is used to treat type 2 diabetes.
– Entresto, made by Novartis, is used to treat certain types of heart failure.
– Enbrel, made by Amgen, is used to treat rheumatoid arthritis.
– Imbruvica, made by AbbVie, is used to treat various types of blood cancers.
– Stelara, made by Janssen, is used to treat Crohn’s disease.
– Fiasp, made by Novo Nordisk, includes various insulin products for diabetes treatment.
The Biden administration’s objective with these negotiations is to address the rising cost of medications in the U.S. Many seniors struggle to afford their medications, and this change is intended to alleviate that burden. However, the pharmaceutical industry views the process as a threat to its revenue growth, profits, and drug innovation. Several drugmakers, including Merck and Johnson & Johnson, have filed lawsuits seeking to declare the negotiations unconstitutional.
The 10 drugs selected for negotiations are among the top 50 with the highest spending for Medicare Part D, the program that covers prescription medications for seniors. These drugs accounted for $50.5 billion, or about 20%, of total Part D prescription drug costs from June 2022 to May 2023.
Next, drugmakers must sign agreements to participate in the negotiations by October 1. CMS will then make an initial price offer to manufacturers in February 2024, and the companies will have a month to accept or counteroffer. The negotiations will conclude in August 2024, with agreed-upon prices published on September 1, 2024. However, the reduced prices will not go into effect until January 2026.
If a drugmaker declines to negotiate, they will be required to pay an excise tax of up to 95% of their medication’s U.S. sales or remove all their products from the Medicare and Medicaid markets. Some estimates suggest that the penalty could be as high as 1,900% of a drug’s daily revenues.
Following the initial round of negotiations, CMS will have the authority to negotiate prices for an additional 15 drugs in 2027 and another 15 in 2028. Starting in 2029 and beyond, the number of negotiated medications will increase to 20 per year.
The Medicare negotiations are projected to save an estimated $98.5 billion over a decade, according to the Congressional Budget Office.
Several drug companies, including Merck, Johnson & Johnson, Bristol-Myers Squibb, and Astellas Pharma, have filed lawsuits to halt the negotiation process. The industry’s largest lobbying group, PhRMA, and the U.S. Chamber of Commerce have also filed their own lawsuits. These legal challenges argue that the negotiations are unconstitutional and violate the Fifth and Eighth Amendments. The pharmaceutical industry hopes to obtain conflicting rulings from federal appellate courts, potentially expediting the issue to the Supreme Court.
Despite the legal challenges, the Biden administration remains determined to continue the fight to lower drug prices and has vowed to stand up to the pharmaceutical industry.
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