Medicare Opens Drug Price Negotiation Period
On February 1, drugmakers received initial offers for how much Medicare is willing to pay for their medicines, kicking off drug price negotiations for the first time. Companies have one month to counteroffer.
The Centers for Medicare & Medicaid Services (CMS)’s drug price negotiation program was put in place by the Inflation Reduction Act. Back in August, Constitution Partners reported that the Biden Administration announced the first 10 drugs subject to negotiation – medicines taken by millions of older Americans to treat conditions like diabetes, cancer, and heart failure. These include:
Each drugmaker has until early March to accept the offer or propose a counteroffer to the government. A series of negotiation sessions could follow, with the process set to conclude by August. The agreed-upon price would take effect in 2026, assuming the negotiation program survives legal challenges.
Legal Battle Ahead
But the pharmaceutical industry is hoping that the courts will step in to shut down the program. The industry has long argued that allowing the government to negotiate prices will curtail private innovation and discourage companies from developing new drugs. The industry’s main lobbying group, the Pharmaceutical Research and Manufacturers of America (PhRMA), blasted the initial offers, arguing that the effort “continues to be an exercise to win political points on the campaign trail rather than do what’s in the best interest of patients.”
Merck & Co. was the first company to sue the US government over the drug price negotiation program, followed by Bristol-Myers Squibb Co., Astellas Pharma, Inc., Johnson & Johnson, and others. These companies stand to lose billions of dollars after government negotiation. The selected drugs will automatically be discounted by 25% to 60%, based on how long since they were first approved or their net price.
Activity in Congress
President Biden isn’t the only one going after drug giants. Senator Bernie Sanders (I-VT) is also pursuing a public pressure campaign trying to lower prescription drug prices. The CEOs of Johnson & Johnson and Merck & Co. Inc. agreed to testify before the Senate Health, Education, Labor and Pensions (HELP) Committee after Chair Sanders threatened to subpoena the executives when they originally declined to appear.
Lawmakers will question these executives about how they price their products. Some Republicans on the committee view this as merely a public shaming tactic without a clear purpose. Some Democrats were hesitant to fully endorse the subpoena Sanders suggested but did encourage pharmaceutical CEOs to testify voluntarily.
The hearing will take place on February 8 at 10am ET. Live coverage of the hearing will be posted on the HELP Committee’s website.