The Biden administration has announced the first 10 drugs chosen for Medicare price negotiation, representing a major step in Democratic efforts to address health care affordability in the U.S.
However, the entire program is being contested in the courts by major pharmaceutical companies and industry groups, which could potentially delay or even halt implementation, with savings currently set to take effect in 2026.
While the discounted prices anticipated to result from the Medicare Drug Price Negotiation Program will only apply to those enrolled in Medicare, advocates are hoping this federal action will have a ripple effect spreading across the pharmaceutical industry.
The Centers for Medicare and Medicaid (CMS) looked at Medicare Part D drug use between June 1, 2022, and May 31, 2023, to determine the eligibility of the drugs chosen. According to the agency, the selected medications account for $50.5 billion — or 20 percent — in gross Medicare Part D-covered prescription drug costs.
“We have never been closer than we are right now to everyone having access to health care that they need and that they can afford,” Department of Health and Human Services (HHS) Secretary Xavier Becerra said Tuesday. “We’re helping bring peace of mind to Americans, especially seniors and people with disabilities who rely on Medicare.”
Here are five things to know about this key milestone.
Negotiations officially beginning
This announcement essentially places the ball in the manufacturers’ court. Drugmakers will have until Oct. 1 to sign an agreement to negotiate — unless courts grant an injunction that could suspend the law pending decisions in myriad lawsuits.
While companies have the option of opting out of negotiations, it’s unlikely many of those who were named Tuesday will forgo signing agreements. This would mean terminating their relationships with Medicare — a sizable source of income for the pharmaceutical industry — for all their medications covered by the program or facing excise tax penalties.
The executive of one pharmaceutical company whose product was named Tuesday told The Hill that they would participate in the process, saying they didn’t feel they have “much of a choice” in the matter given the penalties involved.
Drugs and manufacturers
The bulk of the drugs selected by CMS are widely used for treating or preventing common conditions like heart disease and diabetes.
These include Eliquis and Xarelto, which are used for preventing blood clots, as well as Jardiance, Januvia, Farxiga and NovoLog, which are all used to treat forms of diabetes.
Other medications on the list were Imbruvica, used to treat blood cancers, and autoimmune disease treatments like Enbrel and Stelara.
Among the 11 manufacturers of the medications, five have filed lawsuits — AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb, Janssen Biotech and Merck — against HHS to stop part or all of the negotiation process.
The companies who haven’t filed their own suits may be represented by the trade groups that are also suing to stop the process such as the Chamber of Commerce and PhRMA.
State of legal battles
As of the announcement, there are eight lawsuits challenging CMS’s ability to negotiate drug prices. The suits allege a multitude of constitutional violations stemming from the program, including an illegal taking of product without just compensation.
In a press call Monday, Neil Bradley, executive vice president and chief policy officer for the U.S. Chamber of Commerce, said the White House was being “premature in its celebrations of reaching this milestone.
“They’re attempting to avoid all of the very real-world negative side effects that their policy, if implemented, would necessarily result in,” Bradley said, pointing to a forecast from the nonpartisan Congressional Budget Office predicting that it would result in fewer new drug approvals.
A spokesperson from Novartis similarly said, “The biggest threat from the IRA price-setting provisions is the impact they have on future innovations.”
The Chamber of Commerce has requested an injunction by Oct. 1 in its case, which could push back the start date.
Supporters of the Medicare negotiations have said the public relations and legal battles from Big Pharma are mostly meant to protect profits.
“Drugmakers are trying to scare families when they talk about innovation,” Frederick Isasi, executive director of the healthcare advocacy group Families USA, told The Hill.
Predictions mostly right
For the most part, early projections on what drugs would be included were fairly accurate — given the strict guidelines for which medications could be chosen and the available data on Medicare Part D spending.
One study published in the Journal of Managed Care & Specialty Pharmacy in March accurately included Eliquis, Xarelto, Januvia, Imbruvica, Jardiance and Enbrel.
However, there were some unexpected inclusions on the list.
One criteria for drug selection was that it could not have substantial generic competition. However, some drugs that were named are anticipated to have competition soon, potentially before the negotiated prices go into effect in 2026.
A biosimilar form of Stelara, a medication on the list that is used to treat conditions like Crohn’s disease and ulcerative colitis, is expected to become available by the start of 2025. When asked about Stelara’s inclusion, a senior administration official simply stated they had followed the steps specified by the Inflation Reduction Act (IRA).
Few projections had included the heart failure medication Entresto from Novartis. But the company itself anticipated being named on Tuesday due to a significant rise in the use of the drug as well as recently released Medicare claims data.
“The number of people using Entresto is increasing. In fact, 400,000 Medicare beneficiaries are on this product. So, we’re on the list for volume,” a Novartis spokesperson told The Hill. “It’s not a product that I believe, you know, policymakers were envisioning when they came up with this law.”
Timeline from here
If everything goes according to plan, lowered prices for the medications announced on Tuesday will go into effect beginning in 2026.
Starting in 2024, CMS will begin negotiating maximum fair prices for the medications, with their first offer to companies set to go out in February. CMS is planning to publish the agreed upon maximum fair prices by Sept. 1 next year.
Between now and 2026, 15 more drugs are expected to be named in both 2024 and 2025 for Medicare price negotiation.
CMS Administrator Chiquita Brooks-LaSure said on Tuesday her agency was planning to make a “good faith effort” in its upcoming negotiations.
“We want to ensure access to the innovative treatments and therapies people need when they need them,” a senior administration official said. “We are hopeful that drug companies will come to the table and negotiate with us to make this a reality for the American people.”
