Medicare negotiated drug prices for the first time. Here’s what it got

Caption

The first price negotiations between Medicare and drugmakers could save the billions of dollars a year for taxpayers and beneficiaries. / AP

The White House unveiled the fruits of months of negotiations between the government and pharmaceutical companies: new, lower Medicare prices for 10 blockbuster drugs.

The discounts range from 79% for diabetes drug Januvia to 38% for blood cancer drug Imbruvica.

Health and Human Services Secretary Xavier Becerra played up the savings Wednesday evening.

In a press call ahead of the announcement, Becerra said if the negotiated prices were in effect in 2023, Medicare would have saved $6 billion and beneficiaries would have saved $1.5 billion in out-of-pocket costs, such as copays at the pharmacy counter.

“I had the privilege to work closely with our HHS team and oversee the negotiations,” which took nearly a year, Becerra said. “The negotiations were comprehensive. They were intense. It took both sides to reach a good deal.”

The program selected the first 10 medicines for negotiation last year based on several conditions laid out in the Inflation Reduction Act, which ended Medicare’s 20-year ban on negotiating drug prices. The drugs included blockbuster blood thinners, like Eliquis and Xarelto, as well as drugs for arthritis, cancer, diabetes, and heart failure.

The negotiated prices will go into effect in January 2026.

After all these years, why negotiate now?

Medicare Part D covers outpatient drugs for about 50 million seniors. The federal program was able to negotiate these prices for the first time in the program’s history as a result of the Inflation Reduction Act. Negotiations began in February and progressed through the summer, coming to a close on Aug. 1.

While individual plans have previously been able to negotiate to drive prices down, this is the first time that Medicare was able to use its leverage and negotiate for the program as a whole.

Sen. Amy Klobuchar, a democrat from Minnesota, says she fought for years to get Congress to pass a law lifting the ban on Medicare drug price negotiation.

She joined advocates on Wednesday to discuss the significance of the upcoming negotiated price announcements, calling out the various tactics pharmaceutical companies have used to hang onto their monopoly power and keep prices high over the years.

“It is fine to make profits, but not to the extent that you're actually hurting Americans' health in the United States of America,” she said. “No one should be forced to choose between filling their prescriptions or filling their grocery carts.”

In all, these 10 drugs alone cost Medicare $50.5 billion in 2022, or about 20% of the program’s gross total drug spending that year, according to HHS. They also cost beneficiaries $3.4 billion in out-of-pocket expenses.

The politics of prescription drugs

President Biden and Vice President Harris are expected to trumpet the announcement at an event on Thursday in Maryland, where they will each give remarks about lowering health care costs for Americans.

It’s the first formal joint speaking appearance for Biden and Harris since he stepped aside from his bid for a second term and endorsed Harris last month. She has been campaigning furiously, and is under some pressure to lay out her policy priorities in what is an unusually short campaign season.

The high cost of living is a key issue for voters. Polls have shown Biden has struggled to get credit for his efforts to lower prices and many voters continue to trust GOP presidential nominee Donald Trump more on the economy – but polls also show that voters are less critical of Harris on economic issues.

Harris is expected to give more details about her economic priorities in a campaign speech in North Carolina on Friday.

Looking ahead at Medicare drug price negotiation

It’s expected Medicare drug price negotiations will save the government $98.5 billion over a decade, according to the Congressional Budget Office, which scored the Inflation Reduction Act.

The pharmaceutical industry has pushed back against the negotiations, filing several lawsuits to keep the negotiated prices from going into effect and saying the move will be bad for drug innovation. However, the CBO estimates that the Inflation Reduction Act will prevent 13 new drugs from coming to market over the next 30 years out of the 1,300 of them that are expected to come to market over that time.

Over the past few weeks, several drug companies involved in this round of negotiations told their investors they are able to manage the losses from lower Medicare prices.

Medicare will begin negotiating prices for the next batch of medicines early next year. The process will continue annually with the government negotiating the prices of up to 20 drugs by the end of the decade.