Biden Administration Unveils First Medicare-Negotiated Drug Prices: A Historic Milestone in Affordability Battle
The Biden administration has announced the negotiated prices for the first 10 prescription drugs subject to landmark negotiations between drugmakers and Medicare, a key step in the controversial process aimed at making costly medications more affordable for older Americans. These new prices, which will officially go into effect in 2026, represent a significant milestone in the fight to lower the high cost of drugs in the U.S., a battle that has long been fought by congressional Democrats and consumer advocates.
Key Takeaways:
- Medicare Savings: The administration anticipates that the negotiated prices will generate $6 billion in net savings for the Medicare program in 2026 alone, with an additional $1.5 billion in savings for Medicare enrollees in out-of-pocket costs that same year.
- The Drugs: The 10 drugs selected for the first round of negotiations include treatments for blood clotting, Type 2 diabetes, heart failure, autoimmune diseases, and blood cancers.
- A Precedent Set: These negotiated prices provide a glimpse into how much revenue drugmakers, who fiercely oppose the policy, could lose in the coming years. This also sets the stage for future rounds of Medicare drug price negotiations, with additional drugs to be selected in 2025.
- More Work to Be Done: While hailing the announcement as a historic milestone, both President Biden and Vice President Kamala Harris emphasized that this is just the beginning of the effort to lower healthcare costs for all Americans.
The Fight for Affordability:
The announcement comes on the eve of the second anniversary of President Biden’s Inflation Reduction Act, a landmark law that granted Medicare the power to directly negotiate drug prices with manufacturers for the first time. This unprecedented move marked a crucial shift in the federal program’s nearly 60-year history and aimed to address the growing concern over rising prescription drug costs.
However, the process has not been without its critics. The pharmaceutical industry, deeply opposed to this policy, views it as a threat to their revenue growth, profits, and drug innovation. Several drugmakers and trade groups have filed lawsuits in attempts to derail the negotiations, claiming them unconstitutional. These suits, including ones brought by Merck, Novartis, Novo Nordisk, AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb, and J&J, raise concerns that the negotiations may hinder future drug development and innovation.
The 10 Targeted Medications:
The 10 drugs initially selected for negotiations represent some of the top-selling and most expensive medications covered by Medicare Part D. These drugs, all of which have been on the market for at least seven years without generic competitors, accounted for $50.5 billion, or about 20% of total Part D prescription drug costs from June 1, 2022, to May 31, 2023. This raises the question: will the negotiated prices be lower than the net prices that Medicare Part D plans were already paying? This is a difficult comparison to make, as rebates are confidential, making it challenging to determine the true savings achieved.
What Happens Next:
CMS has until March 2025 to publish a clear explanation for the negotiated prices for each drug, with those new prices set to go into effect on January 1, 2026. By February 2025, the administration will also unveil up to 15 more drugs that will be subject to the next round of price talks, with the agreed-upon prices taking effect in 2027.
This process will continue with CMS selecting up to 20 negotiated medications a year starting in 2029. The administration plans to expand negotiations beyond Medicare Part D drugs, including those covered by Medicare Part B, which are typically administered by doctors, starting in 2028.
A Long-Term Impact:
The outcome of this initial round of price negotiations and the subsequent rounds will have a significant and lasting impact on the cost of medications for millions of Americans. While the initial savings are expected to be substantial, the long-term effects on drug innovation and access to life-saving medications remain a point of contention. Nevertheless, the Biden administration’s commitment to leveraging Medicare’s negotiating power signals a paradigm shift in the U.S. healthcare landscape. This bold initiative, while facing significant challenges, aims to ensure that essential medications are more affordable for millions of seniors and other Americans who rely on them. Moving forward, it will be crucial to monitor the implementation of this program, assess its impact on drug affordability and access, and evaluate potential consequences for future drug innovation.
