The Biden administration is set to release the prices for the first 10 prescription drugs that were subject to negotiations between drugmakers and Medicare. This is a significant milestone in the administration’s efforts to make costly medications more affordable for older Americans. The government estimates that these negotiated prices will result in around $6 billion in net savings for the Medicare program in 2026 alone. Additionally, Medicare enrollees are expected to save $1.5 billion in out-of-pocket costs in 2026.
The Biden administration has emphasized the importance of these negotiated prices in improving the lives of Americans. Chiquita Brooks-LaSure, the administrator for the Centers for Medicare and Medicaid Services, highlighted that affordable drugs can mean the difference between debilitating illness and living full lives. President Joe Biden called the new prices a “historic milestone” and credited Vice President Kamala Harris for her tie-breaking vote in the Senate that made the negotiations possible.
The 10 drugs that were subject to the initial talks include medications used to prevent blood clotting, lower blood sugar for people with Type 2 diabetes, treat heart failure, autoimmune diseases, and blood cancers, among others. The Biden administration will release the maximum fair price for each drug, which is the highest price that a Medicare Part D plan sponsor or beneficiary can pay for the treatment.
However, comparing the new negotiated prices to the current list prices of these medications is challenging. Most of the drugs are already subject to significant rebates after private negotiations with Medicare Part D plans, but the net price paid by Part D plans is confidential. Leigh Purvis, a prescription drug policy principal with AARP Public Policy Institute, explained that it will be difficult to determine if the negotiated prices are lower than the net prices already being paid by Medicare. Nevertheless, AARP has advocated for Medicare’s new negotiation powers and expects savings for Medicare enrollees who take an average of four to five prescription drugs a month.
While the negotiations are seen as a positive step towards reducing medication costs, the pharmaceutical industry views them as a threat to their revenue growth, profits, and drug innovation. Several drugmakers and trade groups have filed lawsuits against the negotiations, claiming they are unconstitutional. However, some of these lawsuits have been rejected in recent months.
The 10 drugs included in the negotiations account for a significant portion of total Part D prescription drug costs. In 2022, 9 million seniors spent $3.4 billion out of pocket on these medications. Some individuals paid more than $6,000 per year for just one of the drugs on the list. Medicare covers approximately 66 million people in the US, with 50.5 million patients enrolled in Part D plans.
Looking ahead, the Biden administration will continue to expand the negotiations. By February 2025, they will unveil up to 15 more drugs for the next round of price talks, with agreed-upon prices going into effect in 2027. CMS will also add more specialized drugs covered by Medicare Part B in 2028. Experts suggest that if Kamala Harris were to be elected president, she would likely try to expand the scope of negotiations further.
Overall, the negotiations between drugmakers and Medicare are a crucial step towards making prescription drugs more affordable for older Americans. While there are challenges in comparing the negotiated prices to current prices, the Biden administration expects significant savings for Medicare enrollees and taxpayers. As the negotiation program continues, Medicare is expected to improve its drug negotiation process, resulting in even greater savings in the future.
