Medicare to Release Drug Price Negotiation List, Drug Giants Respond
The Biden administration is preparing to announce the first 10 medicines it will target under a program that allows the government to negotiate drug prices with pharmaceutical giants. The list is expected to be released on Sept. 1, and industry experts believe it will include some of the most widely prescribed treatments for arthritis, blood disorders, heart disease, and diabetes.
The drug-price program, put in place by the Inflation Reduction Act (IRA), is a signature legislative achievement for President Biden, who has boasted that he took on the drug industry and won. Medicare is the federal health insurance program for older and disabled people; the provisions allowing it to negotiate prices are expected to save the government an estimated $98.5 billion over a decade while lowering insurance premiums and out-of-pocket costs for many older Americans.
Timeline and What to Expect
Medicare is expected to reveal the first 10 drugs to be subject to price negotiation by Sept. 1. Medicare officials will have the final say in which make the list. After Medicare names the first 10 Part D drugs that will face government-negotiated prices starting in 2026, companies have until Oct. 1 to negotiate with the federal government and sign agreements. Drugs that have a generic or biosimilar competitor would be exempt from negotiation.
Which drugs Medicare will pick for negotiation remains up in the air because the agency hasn’t made public the spending data that is a key part of the criteria. The law requires the agency to identify drugs based on total spending between June 1, 2022, to May 31, 2023, but the latest publicly available data are from 2021.
Analysis of 2021 Data
In 2021, the 10 top-selling prescription drugs under Medicare Part D made up less than 1% of all covered drugs. However, these 10 drugs accounted for 22% of gross Medicare Part D drug spending that year, according to a Kaiser Family Foundation (KFF) analysis. Total gross spending on all Medicare Part D drugs was $215.7 billion, with $47.7 billion spent on the top 10 drugs alone.
All 10 drugs were brand name, with 5 being diabetes drugs. The total gross spending on each drug in 2021 was as follows:
Eliquis, $12.6 billion
Revlimid, $5.9 billion
Xarelto, $5.2 billion
Trulicity, $4.7 billion
Januvia, $4.1 billion
Jardiance, $3.7 billion
Imbruvica, $3.2 billion
Humira Citrate-free (Cf) Pen, $2.9 billion
Lantus Solostar, $2.8 billion
Ozempic, $2.6 billion
Ozempic (semaglutide injection), Lantus Solostar, Jardiance, Januvia, and Trulicity are all diabetes drugs. Ozempic is one of multiple glucagon-like peptide-1 (GLP-1) agonists that has gained recent attention as a tool for weight loss. The drug was originally approved in 2017 for the treatment of type 2 diabetes. Semaglutide injection has also been approved for weight loss under the name Wegovy, and in the event of a drug shortage or supply chain issue, patients may be prescribed Ozempic off-label for weight loss.
We would not be surprised to see most of the 2021 top Medicare spending drugs also on the list that Medicare plans to release on Sept. 1.
Reactions from the Right
Republicans opposed the drug pricing provisions, which they regard as a form of government price control. However, because so many Americans are concerned about high drug prices, it is hard for Republicans to come to the industry’s defense.
Instead, Republicans are focused on another priority of the drug industry: scrutinizing the practices of pharmacy benefit managers, which negotiate prices with drug companies on behalf of health plans. The drug companies say that by taking a middleman’s cut, the pharmacy benefit managers are contributing to the high cost of prescription medicines.
Reactions from Drugmakers
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., and Johnson & Johnson, which owns Janssen. More drugmakers are expected to throw their hats in the ring after Medicare releases its drug list.
These companies stand to lose billions of dollars if their products are selected for government negotiation, according to researchers. Drugs selected for negotiation will automatically be discounted by 25% to 60%, based on how long since they were first approved or their net price.
What Supporters Are Saying
Supporters of negotiation say the prices of these drugs have risen too high in recent years, and the price tags of drugs in Medicare’s top-spend list have increased well above inflation. Additionally, many note that the negotiation provisions of the IRA would reduce Medicare’s spending on medicines by more than $101 billion, according to a Congressional Budget Office analysis.
Other Developments in Medicare
On Aug. 21, the Biden administration released initial draft guidance seeking public comment on provisions of the IRA that allow Medicare prescription drug plan enrollees to pay out-of-pocket drug costs in monthly installments throughout the plan year beginning in 2025.
The guidance is designed to help Medicare Part D prescription drug plans and pharmacies prepare for the payment plan option with information on identifying beneficiaries likely to benefit from the new program, how prescription drug plan enrollees can utilize the program, consumer protections for participating enrollees, and the type of data needed to evaluate the program.
The 30-day comment period ends Sept. 20. Comments received will be considered in developing the final guidance, which is expected to be issued in early 2024. CMS also plans to develop and provide tools, like calculators, to help Part D enrollees estimate their monthly payments under the program.
For More Information:
View a fact sheet on the Medicare Drug Price Negotiation Program Revised Guidance.
Read the Medicare Drug Price Negotiation Program Revised Guidance.
Additional information and resources related to Medicare Drug Price Negotiation can be found here.