Biden administration unveils 10 drugs subject to Medicare price negotiations
May 06, 2024
The Biden administration Tuesday identified 10 expensive prescription drugs it has chosen for price negotiations with pharmaceutical manufacturers as the government seeks to ease the financial burden on older and disabled Americans. The announcement marks an unprecedented step in a long political war over the nation’s exorbitant drug costs even as the pharmaceutical industry is still trying to block the plan.
More than half the drugs selected for an initial round of price negotiations are medications to prevent blood clots and treat diabetes, and were taken by millions of people on Medicare in the past year, according to a list released by federal health officials who oversee Medicare, the vast public health insurance system. Others are used to treat heart trouble, autoimmune diseases and cancer. Consumers will not see benefits swiftly — the lower, negotiated prices are due to become available in early 2026.
The three highest-cost drugs on the widely anticipated list of 10 are Eliquis, a blood thinner; Jardiance, which treats diabetes and heart failure; and Xarelto, another blood thinner. They cost Medicare $16 billion, $7 billion and $6 billion, respectively, in the past year.
Tuesday’s step toward reducing Medicare drug prices was a significant element in last year’s Inflation Reduction Act, a law that President Biden and his aides herald as a policy victory, even though the number of medications and the timing of the first price reductions are less ambitious than some Democrats sought for many years.
The fate of the negotiation plan rests with the courts because six drug manufacturers, the U.S. Chamber of Commerce and the pharmaceutical industry’s main trade group have lodged separate lawsuits around the country trying to obstruct it.
Still, the Biden administration, Democratic allies in Congress and consumer health-care advocates portrayed this initial list of 10 drugs as a milestone to shore up the financial stability of the Medicare system and ease the burden on its beneficiaries. Medicare is a federal insurance system for people who are at least 65, as well as younger adults who have disabilities. When last year’s law passed, the Congressional Budget Office predicted that the negotiations would save the program slightly more than $100 billion during the following decade.
“Today is the start of a new deal for patients where Big Pharma doesn’t just get a blank check at your expense and the expense of the American people,” Biden said in remarks Tuesday from the White House East Room. Referring to the spate of lawsuits alleging that the negotiations are unconstitutional, he said, “We’re going to keep standing up” to the pharmaceutical industry. “I’ll have your back,” he said, addressing the nation’s consumers.
The president’s remarks reflected his intention to use health-care costs as a prominent feature of his campaign for reelection. The list also hands congressional Democrats a political opportunity ahead of the 2024 elections to argue that they are focused on pocketbook issues that can help millions of Americans. House members and senators lauded the release of the list.
Rep. Frank Pallone Jr. (N.J.), the ranking Democrat on the House Energy and Commerce Committee, pointedly blamed Republicans for the high cost of prescription drugs, saying in a statement that Tuesday’s announcement “marks the end of a 20-year handout from Republicans in Congress to the pharmaceutical industry.”
Advocates for patients and older Americans also praised the step forward in price negotiations.
“We can’t allow seniors to be Big Pharma’s cash machine anymore,” said Nancy LeaMond, executive vice president for AARP, the large lobbying group for people 50 and older.
More than 60 percent of the 65 million people on Medicare take prescription medication, and 25 percent take at least four prescriptions, according to a survey this summer by KFF, a health-care policy organization. More than 8 in 10 U.S. residents favor government negotiations over drug prices, KFF polling shows.
The rest of the list consists of Januvia, Farxiga and NovoLog, which treat diabetes, among other conditions; Enbrel and Stelara, for arthritis and psoriasis; Entresto, for heart failure; and Imbruvica, for cancers of the blood.
Wall Street analysts had widely expected that many of the 10 drugs selected for price negotiations would appear on the list, based on Medicare expenditures and their sales in the United States, among other criteria. For seniors enrolled in Medicare, including those with financial assistance, their average, annual out-of-pocket costs ranged from $121 for NovoLog to $5,247 for Imbruvica. All told, the Department of Health and Human Services estimates that about 9 million seniors covered by Medicare’s prescription drug benefits used one or more of the 10 drugs in the past year and paid a total of $3.4 billion out of pocket.
The drugs identified Tuesday represent the first wave of medicines destined for price negotiation, with the roster expanding in future years. For this initial batch, manufacturers have until the start of October to agree to negotiation with the Centers for Medicare and Medicaid Services. If they do, the companies will quickly need to disclose an array of data to CMS for each selected drug regarding revenue and what the manufacturer spent to research, develop and produce it.
If a manufacturer refuses to negotiate or won’t agree to what federal rules call a “maximum fair price,” the company must pay a substantial tax or must withdraw from Medicare and Medicaid, the nation’s largest public health insurance program designed for people with low incomes. It is not yet clear which manufacturers will agree to negotiate.
To be considered for the price negotiation, a drug must have no competition from a less-expensive generic competitor, and a biologic — a category of drugs made from living organisms — must not compete with any cheaper version known as biosimilars. The number of drugs involved will expand slightly during the next few years, with a total of 15 each of the next two years and 20 drugs in following years. This year and next, the drugs are part of Medicare’s Part D, the program’s drug insurance created two decades ago. After that, the drugs can come from Part D or from Part B, such as cancer therapies administered by doctors.
Senior health administration officials said CMS started with nearly 7,500 prescription drugs that are covered through Part D. Officials then whittled the possibilities to 50 that don’t have much competition and that result in the highest costs to Medicare, including only drugs that were approved by the Food and Drug Administration at least seven years ago and biologics approved at least 11 years ago. A few other criteria were used, too. From there, CMS ranked the 50, finally choosing the 10 with the highest costs to the program.
Limited though it is, the arrival of Medicare drug price negotiation is a sharp break from Medicare’s history.
When the program was created in the 1960s, it covered drugs that were administered in a doctor’s office — Part B — but excluded medications that patients took on their own. Efforts over the decades to add outpatient drug benefits were woven into larger health reform proposals that failed, and the broader drug benefits did not become part of the program until a set of Medicare changes adopted by Congress in 2003. To win Republican support, that statute included language prohibiting any role for the government to negotiate medication prices. The 2022 Inflation Reduction Act — known as the IRA — rescinded that prohibition.
Since the outpatient drug benefits embedded in the 2003 law began three years later, Medicare beneficiaries have been able to get that coverage by buying a separate drug plan through Part D, or as part of managed-care plans, known as Medicare Advantage. Either way, beneficiaries still pay some of the cost of the medicines, and the government has not influenced the prices that pharmaceutical companies set.
The push for price negotiation has long faced intense opposition from pharmaceutical companies, which contend that capping potential earnings erodes their ability to invest in further research and development. After the rare loss on Capitol Hill last year, the industry and its business allies have turned to the courts with the eight lawsuits, which could take years to resolve and perhaps land before the Supreme Court.
If the negotiation process stands, industry analysts predict it will have profound ripple effects. Prices negotiated and made public by Medicare could affect the expense of drugs under other types of insurance. In turn, pharmaceutical companies could focus on developing larger-molecule drugs — such as vaccines and gene therapies — that are exempted from potential Medicare price negotiations for a longer time frame than prescription pills.
Stephen J. Ubl, president and chief executive of Pharmaceutical Research and Manufacturers of America, the industry’s main trade group, called the list of 10 drugs “the result of a rushed process focused on short-term political gain rather than what is best for patients.” Ubl contended in a statement that the focus on the medications’ total cost to Medicare is misleading because some of the drugs already are available with discounted prices and rebates because of private-market negotiations with insurers offering Medicare drug benefits.
Manufacturers of the initial 10 medications railed against the Inflation Reduction Act’s attempt to lower prices. Boehringer Ingelheim, which makes Jardiance, and Bristol Myers Squibb, which makes Eliquis, argued that their drugs were being targeted because they are used by so many beneficiaries — leading to higher spending — and not because their price is too high.
Novartis, maker of the heart-failure medication Entresto, said it continued to invest in clinical trials after the drug’s 2015 FDA approval, resulting in an expansion of conditions it is approved to treat. If the negotiation program had existed then, the company said, “we may not have been able to invest in researching and developing Entresto in these additional indications, depriving patients of a meaningful treatment advance.”
Johnson & Johnson — with three drugs on the list, the most of any drugmaker — said the Inflation Reduction Act would “put an artificial deadline on innovation, threatening intellectual property protections and shortening the timeframe to deepen our understanding of patients’ unmet medical needs.”
For the Biden administration, the Inflation Reduction Act provision is a centerpiece of a battle to curb drug prices that it is carrying out on several fronts.
Under the law, Medicare beneficiaries pay a limit of $35 a month for insulin. Biden issued an executive order last year directing the Department of Health and Human Services to study new models to lower drug costs for Medicare and Medicaid beneficiaries. In May, HHS proposed a rule that would give the department and states more leverage to negotiate payment for the most expensive drugs covered by Medicaid. And the Federal Trade Commission has taken a more aggressive approach to pharmaceutical mergers, citing concerns about price increases when it filed suit in May to block Amgen from acquiring Horizon Therapeutics — even though the two companies don’t directly compete.
Because the impact of the Medicare drug price provision will unfold over years, the negotiated prices may have a minimal effect on some drugs, including Eliquis, the blood-thinning medication that costs Medicare by far the most of any drug. Eliquis, made by Bristol Myers Squibb and Pfizer, is set to lose patent protection around 2028, two years after the lower prices begin.
“Whatever the impact is, [it] will not be long lasting on our portfolio,” Angela Hwang, Pfizer’s chief commercial officer, said of Eliquis in a call with financial analysts this month, according to a transcript compiled by S&P Global Market Intelligence.
Meena Seshamani, CMS’s Medicare director, said that, in addition to leading to fairer prices, the drug negotiations will help make clear what the true demand is for the selected drugs, because more Medicare beneficiaries should find them accessible. “If we can make drugs more affordable for people, this will enable people to take drugs that they might not be able to,” Seshamani said.
Maegan Vazquez contributed to this report.