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Medicare Negotiated Lower Prices for These 10 Drugs
Under recent federal law, Medicare now has the power to directly negotiate pricing with major pharmaceutical companies. The Inflation Reduction Act (IRA) empowered the Centers for Medicare and Medicaid Services (CMS) to negotiate the prices for certain prescription drugs. The intent was to secure cost savings for the government and ensure seniors’ access to some of the priciest medications. Accordingly, CMS has completed its first round of negotiations with prescription drug companies and secured lower pricing on 10 prescription drugs. Based on prior year pricing, the government estimates it would save a total of $6 billion, and consumers would pay roughly $1.5 billion less for these medications out of their own pockets.
The New Prices Will Save the Government and Consumers Billions
Seniors covered under Medicare Part D must pay 25% of the cost of the drug as coinsurance. However, rising prescription drug costs have placed a burden on both seniors and the government. In 2021, Medicare spent roughly $216 billion on prescription drug costs under Part D, and the annual figure rises each year. The 10 medications covered under the recent round of negotiations accounted for roughly 20% of Medicare’s total spending on prescription drugs. The cost of these specific medications doubled in the five years before the negotiation.
The drugs that are covered under the negotiations are as follows:
- Eliquis
- Jardiance
- Xarelto
- Januvia
- Farxiga
- Entresto
- Enbrel
- Imbruvica
- Stelara
- NovoLog/Fiasp
For example, total spending on Eliquis from May 2022 to June 2023 amounted to over $16 billion. Each of the drugs on the list saw total expenditures of at least $2 billion. The discounts that CMS negotiated may reduce the price of these drugs by up to 79%.
The Government Achieved Higher Price Reductions Than Forecast
Industry experts have been surprised at the extent of the price reductions that the government was able to achieve in its negotiations with major drug companies, which are used to having pricing power over their products. The major drug companies have vigorously challenged the new law in federal court but have not yet successfully been able to persuade a court that this provision of the law is unconstitutional. These companies have also claimed that price caps on these pharmaceuticals will ultimately reduce their incentive to innovate and develop new products. Some are concerned that setting the precedent of price negotiation may spill over into other markets and further reduce drug companies’ profits.
The negotiated prices do not take effect immediately. They will be effective beginning in 2026. The participating drug companies must ensure eligible people with Medicare prescription drug coverage can access the negotiated prices for 2026 and 2027. In the meantime, a $2,000 cap on the amount seniors must pay for covered prescription drugs will take effect in 2025.
CMS Promises to Expand the List of Drugs Subject to Price Negotiation
CMS promises to expand the list of drugs subject to price negotiation over the coming years. The agency has already released guidance on how it will undertake a second round of negotiations for additional drugs. The law allows the agency to negotiate pricing for up to 20 additional drugs in subsequent years. The price reductions apply only to medications under Medicare Part D that patients purchase at pharmacies. In future negotiations, Medicare Part B drugs (administered by doctors) would also be covered.
Future Uncertainty with New Presidential Administration
With the coming change in presidential administrations, there is still uncertainty as to how this law will be carried out in the future. The incoming presidential administration has a Feb. 1, 2025 deadline to select the next 15 drugs for future price negotiation.
Contact the New Jersey Insurance Lawyers at Herold Law, P.A.
For help with insurance coverage issues, contact the New Jersey insurance lawyers at Herold Law, P.A. Call 908-679-5011 or complete our online form to schedule an appointment. Our office is in Warren, New Jersey, and we work with clients in Somerville, Morristown, and across the state.
