Biden administration to negotiate costs on Medicare’s priciest drugs

The Biden administration this week is expected to announce the first 10 prescription drugs the federal government will negotiate under a new federal law that aims to reduce the cost of Medicare’s most expensive medicines.

For the first time, the federal government is allowed to negotiate drug prices for older Americans because of the Inflation Reduction Act, the sweeping climate and health legislation passed by Congress last year. The Centers for Medicare & Medicaid Services must publish the list of 10 drugs by Friday, but administration officials have signaled the announcement could come earlier in the week.

Consumer and senior advocates long have sought efforts to rein in drug prices for Medicare enrollees and taxpayers.

The federal health program for adults 65 and older and disabled people sets reimbursement amounts for medical care from doctors and hospitals, but until now, Medicare has been prohibited from negotiating drug prices under 2003 legislation that expanded Medicare’s prescription drug coverage.

Analysts say some expensive and widely used drugs for arthritis, cancer, diabetes or heart disease could be targeted for negotiation. Price changes for the first batch of 10 drugs won’t take effect until 2026. Over the next two years, another 30 drugs will be selected for negotiated prices beginning in 2027 and 2028.

“The negotiation process is going to meet its goal of capturing those drugs that are either used by a lot of people, are very expensive, or both,” said Leigh Purvis, a prescription drug policy principal with AARP Public Policy Institute.

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Big Pharma takes the fight to court

But the pharmaceutical industry is challenging the drug negotiations. Big Pharma and industry allies have filed eight lawsuits seeking to derail drug negotiations. AstraZeneca, Astellas Pharma, Bristol Myers Squibb, Johnson & Johnson, Merck and the drug industry’s trade group, PhRMA, have filed legal challenges, as has the U.S., Michigan and Ohio chambers of commerce.

The lawsuits use unique legal theories on why drug negotiations should be halted. In a lawsuit filed Friday at U.S. District Court in Delaware, AstraZeneca said the Inflation Reduction Act’s drug negotiation provisions conflict with another federal law, the Orphan Drug Act, which seeks to promote drug industry investment in new therapies for rare diseases.

If the drug negotiations are allowed to continue, U.S. patients “will get delayed access to scientific breakthroughs relative to other parts of the world,” said Dave Fredrickson, AstraZeneca’s executive vice president of oncology.

The growing list of lawsuits filed in different courts likely represents a strategy to get a case before the U.S. Supreme Court, said Kelly Bagby, vice president of litigation for the AARP Foundation.

“What they’re trying to do is create as much momentum to get to the Supreme Court as quickly as possible,” Bagby said.

Patient on Xarelto looks for negotiated discount

Seniors who rely on expensive prescription drugs are anxiously awaiting which drugs could be discounted through negotiation.

Massachusetts resident Ellen Farmer, 64, takes Xarelto to manage a type of abnormal heartbeat called atrial fibrillation. Her doctor told her she needed to take the blood thinner or she could be at risk for blood clots, heart attack or stroke.

“I was shocked and terrified when the pharmacist told me the monthly copay for Xarelto, after insurance, would be $1,000,” Farmer said. “There was no way I could afford that.”

Farmer is enrolled in Medicare because of a disability caused by her heart condition. And subsidies available to some low-income Medicare recipients − another provision of the IRA − means her monthly copayment has for the drug has been sharply reduced.

She said it “gives me hope” the price of her medication might be cut even more through drug negotiations.

“There are far too many in this country who cannot afford the price of countless medications they need to survive,” Farmer said. “No one should ever have to choose between financial security and their health.”

Insulin costs, vaccines among other benefits

The law does not give Medicare unlimited authority to select which drugs to negotiate. Retail drugs are eligible only after they have been on the market for nine years without a competing generic version. Physician-administered drugs will have 13 years before being subject to negotiation.

While consumers won’t see discounts from negotiated prices until 2026, other provisions promise more immediate savings. In 2025, Enrollees in Medicare’s Part D drug plans will have their out-of-pocket expenses for prescriptions capped at $2,000 per year.

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The law also capped Medicare recipients’ out-of-pocket insulin costs at $35 per dose beginning this year. While that provision did not extend to Americans covered by private insurance plans, three major insulin makers said they would slashed prices by 70% or more on their respective products.

Medicare recipients also won’t pay out-of-pocket costs for recommended vaccines such as shingles, whooping cough or tetanus.

The federal law also requires drugmakers to pay federal rebates if they increase prices above inflation levels. In June, Medicare said it would target 43 drugs with price hikes that exceeded this threshold. Officials said the rebates could save consumers money through lower costs, as well as trim Medicare’s spending.

Purvis, of AARP Public Policy Institute, said even consumers who don’t take expensive prescriptions will see benefits. The health-related provisions of the federal law are expected to save taxpayers $173 billion over the next decade, according to a Committee for a Responsible Federal Budget analysis.

“They are going to see savings as a result of negotiation,” Purvis said.

Biden administration to negotiate costs on Medicare’s priciest drugs

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