Administration reaches negotiation agreement on 10 drugs

Photo: Willie B. Thomas/Getty Images

In a bid to lower prescription drug prices, the Biden administration this week reached an agreement for new, lower prices for the 10 drugs selected for negotiations. These drugs, the White House said, are some of the most expensive and most frequently dispensed drugs in the Medicare program and are used to treat conditions such as heart disease, diabetes and cancer.

The new prices will go into effect for people with Medicare Part D prescription drug coverage beginning January 1, 2026.

The drugs subject to the new pricing include Januvia; Farxiga; Enbrel; Jardiance; Setalara; Xarelto; Eliquis; Entresto; Imbruvica; and the Fiasp, or NovoLog FlexPen.  

The Centers for Medicare and Medicaid Services said that if the new prices had been in effect last year, Medicare would have saved an estimated $6 billion, or approximately 22%, across the 10 selected drugs. These negotiated prices range from 38% to 79% discounts off list prices. About 9 million people with Medicare use at least one of the 10 drugs selected for negotiation. 

People with Medicare prescription drug coverage are expected to see aggregated estimated savings of $1.5 billion in their personal out-of-pocket costs in 2026, according to CMS' fact sheet.

As a hypothetical example, a senior with Medicare who takes Stelara pays a 25% coinsurance on the drug, which may amount to about $3,400 today for a 30-day supply. When the negotiated price goes into effect in 2026, CMS said that the same 25% coinsurance would cost the beneficiary about $1,100 before the person reaches the catastrophic cap, after which the beneficiary will pay no more out of pocket on their prescription drugs. A beneficiary's actual costs will depend on their plan's benefit design, the agency said.

In August 2023, HHS announced the first 10 drugs covered under Medicare Part D selected for the first cycle of negotiations.

The selected drugs accounted for $56.2 billion in total Medicare spending, or about 20% of total Part D gross spending in 2023. Overall, CMS said total Part D gross spending for the 10 selected drugs more than doubled from 2018 to 2022, from about $20 billion to about $46 billion, an increase of 134%. Medicare enrollees paid a total of $3.4 billion in out-of-pocket costs in 2022 for these drugs.

The Office of the Assistant Secretary for Planning and Evaluation (ASPE) also released new data detailing historic pricing trends of the 10 drugs selected for the first cycle of the negotiation program. The report finds that from 2018 to 2023, list prices increased as much as 55%.

WHAT'S THE IMPACT?

President Biden signed the Inflation Reduction Act into law in 2022. It gave Medicare the ability to directly negotiate the prices of certain high expenditure, single source drugs without generic or biosimilar competition. CMS selected ten drugs covered under Medicare Part D for the first cycle of negotiations for initial price applicability year 2026 and engaged in voluntary negotiations with the drug companies for the selected drugs.

The new price negotiations generated a mixed reaction. Pharmaceutical Research and Manufacturers of America (PhRMA) president and CEO Steve Ubl said the move is intended to "drive political headlines" and said patients will be disappointed when they find out what it means for them.

"There are no assurances patients will see lower out-of-pocket costs because the (Inflation Reduction Act) did nothing to rein in abuses by insurance companies and pharmacy benefit managers who ultimately decide what medicines are covered and what patients pay at the pharmacy," said Ubl.

In particular, PhRMA said the government unilaterally determines the price of the drugs, and if the manufacturer doesn't go along with that, there are two options. One is to pay a tax on the total sales revenue of the medicine selected for price setting; PhRMA maintains this tax would be up to 1,900% of total sales revenue, not 95% as some reports have said. The second option is to allow medicine to get withdrawn from Medicare Parts B and D and Medicaid – not just the medicine selected for price-setting.

"As a result of the IRA, there are fewer Part D plans to choose from and premiums are going up," said Ubl. "Meanwhile, insurers and PBMs are covering fewer medicines and say they intend to impose further coverage restrictions as the price-setting scheme is implemented.

"The IRA also fundamentally alters the incentives for medicine development," he said. "Companies are already changing their research programs as a result of the law, and experts predict this will result in fewer treatments for cancer, mental health, rare diseases and other conditions. Medicine development is a long and complex process, and the negative implications of these changes will not be fully realized for decades to come."

The move by the feds did generate positive reaction from the American Association of Retired Persons, with AARP Executive Vice President and Chief Advocacy and Engagement Officer Nancy LeaMond calling it a significant step forward in longstanding efforts to lower prescription drug prices.

"AARP members from across the political spectrum overwhelmingly called lowering prescription drug costs a top concern – and this first round of Medicare-negotiated prices will bring financial relief to millions of older Americans," said LeaMond. "As the voice for the 100 million Americans ages 50-plus, we will continue working to ensure this law is fully implemented and benefits older Americans for decades to come." 

THE LARGER TREND

CMS will select up to 15 more drugs covered under Part D for negotiation for 2027 by February 1, 2025. The agency will select up to 15 more drugs covered by Part B or Part D for 2028, and up to 20 more Part B or Part D drugs for each year after that, as required by the Inflation Reduction Act.

When the negotiated prices go into effect in 2026, CMS said people enrolled in Medicare prescription drug coverage would save an estimated $1.5 billion. These savings from the Negotiation Program are in addition to savings from other cost saving provisions in the Inflation Reduction Act, CMS said, such as the first ever cap on out-of-pocket drug costs for people with Medicare.
 

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.