First 10 drugs for Medicare price negotiations chosen

In a historic move aimed at lowering drug costs for millions of Americans, the federal government Tuesday announced the first 10 drugs that will be subject to price negotiations between Medicare and pharmaceutical companies.

As a key provision of the Inflation Reduction Act enacted last year, the government will begin negotiating a fair market price for the widely used drugs, which include Bristol-Myers Squibb's Eliquis, Johnson & Johnson's Xarelto and Eli Lilly/Boehringer Ingelheim's Jardiance, among others.

Makers of the drugs have 30 days to agree to participate or face steep excise taxes or choose to withdraw their products from coverage by Medicare. The IRA mandates that up to a certain number of drugs will be added annually to the negotiations.

The pharmaceutical industry, which fought the IRA, has sued and there are seven other pending lawsuits from drug companies and trade groups that many experts expect to land in the Supreme Court. However, in briefings the Department of Justice is arguing that government drug price negotiations do not violate the Constitution. And the Congressional Budget Office estimates that Medicare negotiations will save the government nearly $100 billion over 10 years.

At a White House event Tuesday, President Joe Biden blasted brand name drugmakers for "playing games" with patent law to keep "prices high to increase their profits."

"Finally, finally, finally we had enough votes — by a matter of one — to beat Big Pharma."

The 10 drugs on the list accounted for $50.5 billion (or 20 percent) in total Part D spending from June 1, 2022, through May 31, 2023, according to the Department of Health and Human Services.

The 10 drugs selected represent $3.4 billion in out-of-pocket payments from Medicare beneficiaries, according to an HHS fact sheet.

The drug with the highest amount of annual out-of-pocket costs was Imbruvica with $5,247 per enrollee and NovoLog had the lowest with $121.

“Among enrollees who do not receive financial assistance, average annual out-of-pocket costs ranged from a high of $6,497 per enrollee for Imbruvica to a low of $261 per enrollee for NovoLog,” according to an HHS fact sheet.

Absent a court ruling that postpones negotiations, the talks will begin Oct. 1 and finish Aug. 1, 2024. Companies whose drugs are on the list must let the CMS know within 30 days whether they will participate in the process. If a drugmaker declines, it could face an excise tax of between 65 percent and 95 percent.

Multiple drugmakers, including Merck and Johnson & Johnson; the Pharmaceutical Research and Manufacturers of America, the industry’s trade group; and the U.S. Chamber of Commerce and some state chambers have sued the government in different federal courts as part of what legal experts say is a shotgun strategy to halt implementation of the law.

“Giving a single government agency the power to arbitrarily set the price of medicines with little accountability, oversight or input from patients and their doctors will have significant negative consequences long after this administration is gone,” PhRMA CEO Stephen Ubl said in a statement following the release of the list of drugs.

But other groups, including AARP, lauded the announcement as a landmark policy victory for older adults who have high drug costs.

“For too long, big drug companies have fleeced our country and padded their profits by setting outrageous prices, all at the expense of American lives,” AARP Chief Advocacy and Engagement Officer Nancy LeaMond said. “The number one reason seniors skip or ration their prescriptions is because they can’t afford them. This must stop.”

Congressional Republicans responded to the announcement by noting that the negotiations will lead to fewer new drugs.

“President Biden was quick to champion the Cancer Moonshot initiative, yet it is patients, like those who are battling cancer and rely on new and innovative treatments, who will suffer the most,” said Cathy McMorris Rodgers (R-Wash.), chair of the House Energy & Commerce Committee, in a statement.

McMorris Rodgers added that the incentives created under the program could lead to higher initial list prices for new drugs, “potentially wiping out any savings to patients.”

CMS plans to publish the final negotiated prices by Sept. 1 of next year, and they will go into effect at the start of 2026.

The number of drugs subject to price negotiations will likely increase every year. The law allows CMS to negotiate the price of an additional 15 Medicare Part D drugs for 2027. For 2028, CMS can select another 15 Part D or Medicare Part B drugs, which covers drugs administered in a doctor’s office, such as chemotherapy.

Starting in 2029 and each subsequent year, CMS can add another 20 Part D or Part B drugs to the drug price negotiation program.