Medicare drug-price negotiations are on: Let the haggling begin

For the first time — thanks to the Inflation Reduction Act, a key pillar of the Biden administration’s domestic agenda — the federal government will begin negotiating prices on 10 costly prescription drugs covered by Medicare on Feb. 1.

“Medicare is no longer taking whatever prices for these drugs that the pharmaceutical companies demand,” President Joe Biden said.

Let the haggling begin. 

Lower drug prices, which have been challenged fiercely in court by the pharmaceutical​ industry, can’t come soon enough for seniors. The Commonwealth Fund, a healthcare advocacy group, said that in 2022, high drug costs “forced one of five U.S. adults age 65 and older to skip or delay filling a prescription, miss or reduce doses, or use someone else’s medication.” And more than half, it added, “resort to cost-coping strategies like coupons or free samples so they can get the medications they need but cannot afford.” 

Imagine being 75 and having to skip your meds because you can’t afford them. Or engaging in one-offs like free samples to treat a chronic condition. Clearly, this is no way to run a railroad. But that’s the way i​t is for tens of millions of Americans​, Commonwealth said.

We’ve already seen how the administration has beaten ​Big ​Pharma in one big area: insulin. 

Since Jan. 1, Medicare enrollees have had to pay no more than $35 a month for each of their insulin prescriptions. This is a huge deal, given that the inflation-adjusted cost of the life-saving medication tripled between 2012 and 2022, according to the American Diabetes Association. The ADA added that before the cost reduction, as many as 1 in 4 patients ​were unable to afford insulin, leading them to ration doses — with sometimes fatal results 

Talks between Medicare and drug makers are scheduled to run through Aug​. 1, so we won’t find out how much prices could drop until Sept. 1 — reductions that would not go into effect until 2026. But these are the ​10 drugs that are looking at possible price reductions — and they are big ones, including several more manufacturers of diabetes-fighting medications: 

    •    Eliquis (blood thinner, made by Bristol Myers Squibb
BMY,
+0.08%
and Pfizer
PFE,
-1.32%
)

    •    Enbrel (rheumatoid arthritis, made by Amgen
AMGN,
-0.42%
)

    •    Entresto (heart failure, made by Novartis
NVS,
-1.53%
)

    •    Farxiga (diabetes, heart failure and chronic kidney disease, made by AstraZeneca
AZN,
-1.81%
)

    •    Fiasp and NovoLog (diabetes, made by Novo Nordisk
NVO,
-1.80%
)

    •    Imbruvica (blood cancers, made by AbbVie
ABBV,
+0.64%
and Johnson & Johnson
JNJ,
-1.11%
)

    •    Januvia (diabetes, made by Merck
MRK,
+0.02%
)

    •    Jardiance (diabetes, heart failure and chronic kidney disease, made by Boehringer Ingelheim and Eli Lilly
LLY,
+1.09%
)

    •    Stelara (psoriasis and Crohn’s disease, made by Johnson & Johnson​)

    •    Xarelto (blood thinner, made by Johnson & Johnson) 

So how much will people wind up saving? Dr. Stacie B. Dusetzina, a professor of health policy and cancer research at Vanderbilt University Medical Center, told MarketWatch that this depends on a variety of factors, such as how old the drug is, how many competing products are in the marketplace, and how much in discounts are currently available for them from pharmacy benefit managers (PBM). The numbers will obviously vary. 

For example, Dusetzina said that the Inflation Reduction Act established a minimum price discount of 25% for a drug that is nine to 12 years old. For older drugs, the minimum discounts could be far more substantial: “as high as 60%. So, yes, people will save money,” she said. 

It’s not just ordinary folks who could save big bucks. The federal government — currently grappling with soaring Medicare and Medicaid costs — also stands to benefit. Let’s use Imbruvica as our example. Here, a 25% discount would save Uncle Sam around $560 million per year, according to an analysis published in the Journal of Managed Care & Specialty Pharmacy. 

Multiply that by the number of drugs being discussed (in this round of negotiations alone) and we’re talking several billion dollars. Even in Washington, where a billion dollars isn’t what’s used to be, that would be some serious money. 

Pharmaceutical companies have argued that all this is detrimental to the long-term interests of consumers. Alex Schriver, a spokesman for the Pharmaceutical Research and Manufacturers of America (PhRMA), a lobbying arm of the drug industry, told NBC, “Government bureaucrats are operating behind closed doors to set medicine prices without disclosing for months how they arrived at the price or how much patient and provider input was used.” He added, “This lack of transparency and unchecked authority will have lasting consequences for patients long after this administration is gone.” 

One of the industry’s arguments has been that the Inflation Reduction Act and its downward forcing of prices could hamper innovation and thus the number of new drugs that could come to market in the future. Yet the nonpartisan Congressional Budget Office reported to Congress in November that the administration’s actions would result in “one fewer drug coming to U.S. market over 2023-2032​, about five the subsequent decade, and about seven over the decade after that, for a total of 13 fewer drugs coming to market over the next 30 years.” 

​“That’s a very small share of the 1,300 new drugs expected in that period,” wrote Larry Levitt, executive vice president for health policy at KFF (previously known as the Kaiser Family Foundation).

But savings for consumers, who have been paying nearly three times more for medications than citizens of other advanced nations? That is likely to be anything but small.