Medicare released prices for the first 10 drugs subject to negotiation

The Biden administration on Thursday released prices for the first 10 prescription drugs subject to landmark negotiations between drugmakers and Medicare, a milestone in a controversial process aimed at making expensive drugs more affordable for older Americans.

The government estimates that the new negotiated price for the drug will save about $6 billion for the Medicare program by 2026, when it officially takes effect. That is based on the estimated savings that will be produced if implemented in 2023, a senior administration official told reporters on Wednesday.

The Biden administration also expects the new prices to save Medicare enrollees $1.5 billion in out-of-pocket costs in 2026 alone.

“For many people, being able to provide these medications means the difference between a debilitating illness and a full life,” Chiquita Brooks-LaSure, administrator for the Centers for Medicare and Medicaid Services, told reporters. “The value of this discussion is not just about the cost, but to help your father, grandfather or you live longer, healthier lives.”

It comes a day before the second anniversary of President Joe Biden’s Inflation Reduction Act, which empowered Medicare to directly break drug prices with manufacturers for the first time in the federal program’s nearly 60-year history.

The government announced the first set of drugs selected for price negotiations in August 2023, kicking off a nearly year-long negotiation period that ended earlier this month.

The final price gave drugmakers, who strongly opposed the policy, a glimpse of how much revenue they would lose over the next few years. It also sets a precedent for additional rounds of Medicare drug price negotiations, which will begin in 2025 and beyond.

In a statement Thursday, President Joe Biden called the new negotiated price a “historic milestone” made possible by the Inflation Reduction Act. He specifically mentioned Vice President Kamala Harris’ bill for legislation in the Senate in 2022.

Harris, the Democratic presidential candidate, said in a statement that he was proud to be voted in, adding that much work remains to be done to lower health care costs for Americans.

“Today’s announcement will be life-changing for many loved ones across the country, and we’re not stopping here,” Harris said in a statement Thursday, noting that additional prescription drugs will be selected for future negotiations.

The Biden administration will release the so-called maximum price for each drug, the highest price a Medicare Part D sponsor or beneficiary can pay for that treatment. Medicare Part D plans, provided by private insurance companies, cover prescription drugs filled by older Americans at retail pharmacies.

The lengthy negotiation process involved months of back-and-forth price offers between the companies and Medicare, which determined the initial bid for each drug using sales volume data, federal financial support for the drug’s development and data on pending or approved patent applications and exclusivity, among other information apart.

It is difficult to compare the new negotiated price of the drug with the current list price, which the wholesaler, distributor or other direct buyer pays the factory for the drug before any discount.

That’s because most of the 10 drugs are already subject to significant rebates after private negotiations with Medicare Part D plans. But the highly rebated net price that Part D plans pay for a given drug is unknown because the negotiations are confidential, according to Leigh Purvis, principal of prescription drug policy with AARP. Public Policy Institute.

AARP, an influential lobby group that represents people over 50, has advocated for new Medicare negotiating powers.

“So I wonder what people are going to do — is the negotiated price lower than the net price that Medicare Part D has paid?” Purvis told CNBC. “And that’s the comparison that people are looking for. Now, finding out that the rebate is secret, that’s going to be a tough ask.”

A senior administration official confirmed that the direct comparison between the negotiated price and the net price paid by Medicare is “commercially confidential information.”

“Every Medicare Part D plan has its own rebate agreement, and Medicare is prohibited from sharing any information that is in there,” the official told reporters.

The negotiations are at the center of the Biden administration’s efforts to reduce rising drug costs in the U.S. Some congressional Democrats and consumer advocates have long pushed for the change, as many seniors across the country struggle to pay for care.

The price talks are expected to save money for people enrolled in Medicare, who take an average of four to five prescription drugs each month.

Almost 10% of Medicare enrollees aged 65 and older, and 20% of those under 65, report challenges in affording drugs, a senior administration official told reporters last year.

But the pharmaceutical industry sees the process as a threat to revenue growth, profits and drug innovation. Several drugmakers and trade groups filed lawsuits last year to scuttle the negotiations and declare them illegal.

The suit brought by Merck and Novartis against the price negotiations awaits a decision from the district court. Each case brings claims that overlap with suits from Novo Nordisk, AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb and J&J that have been dismissed in recent months.

These 10 drugs are among the top 50 with the highest spending for Medicare Part D.

Those 10 drugs accounted for $50.5 billion, or about 20%, of total Part D prescription drug spending from June 1, 2022, to May 31, 2023, according to CMS. By 2022, 9 million seniors will spend $3.4 billion out of pocket for these 10 drugs, and some will pay more than $6,000 a year for just one of the drugs on the list, according to the Biden administration.

The drug has been on the market for at least seven years without generic competition, or 11 years for biological products such as vaccines.

Medicare covers about 66 million people in the US, and 50.5 million patients are enrolled in Part D plans, according to 2023 data from the health policy research organization KFF.

CMS has until March next year to publish an explanation for negotiated prices for each drug. The new prices will take effect on January 1, 2026.

In February 2025, the Biden administration will also reveal up to 15 other drugs that will be subject to the next price negotiations, with the agreed prices going into effect in 2027. Drug manufacturers will have until the end of the month to decide whether to participate in the program.

After that second round, CMS can negotiate prices for 15 more drugs that will take effect in 2028. That number increases to 20 drugs that are negotiated annually starting in 2029.

“Sometimes I think people will get caught if the drug is not on the list, but it will be on the list at some point in the future if they are taking a drug that causes high costs,” Purvis said. .

CMS will only select Medicare Part D drugs for covered drugs in the first two years of negotiation. It will add more specialty drugs covered by Medicare Part B, which are usually prescribed by doctors, by 2028.

In particular, Harris will try to expand the scope of negotiations if elected president, experts told CNBC.

Purvis stressed that Medicare “is only going to get better at this process as it moves forward.”

“We expect billions of dollars in savings for taxpayers to start flowing as this negotiation program winds down and Medicare gets better at the drug negotiation process,” he told CNBC.