The Biden administration is poised to unveil the initial roster of 10 prescription drugs that will undergo federal negotiations in compliance with a novel legislation aimed at mitigating the expenses of Medicare’s most exorbitant medications.
A milestone development, the Inflation Reduction Act, passed by Congress the previous year as an expansive measure encompassing climate and health concerns, has conferred the federal government with the authority to engage in price negotiations for pharmaceuticals intended for older Americans. The list of the inaugural 10 drugs, subject to negotiation, is slated to be disclosed by the Centers for Medicare & Medicaid Services by week’s end, although there are indications from administration sources that the announcement might surface earlier.
Long-standing advocates for consumers and senior citizens have ardently pressed for endeavors to curtail drug prices for Medicare beneficiaries and taxpayers.
The federal health program, tailored to adults aged 65 and above and individuals with disabilities, stipulates reimbursement rates for medical services rendered by healthcare practitioners and institutions. Up until now, Medicare had been precluded from engaging in drug price negotiations, a restriction originating from legislation in 2003 that expanded the program’s coverage of prescription medications.
Analysts posit that certain expensive and widely prescribed drugs, targeting conditions such as arthritis, cancer, diabetes, and heart disease, could be earmarked for negotiation. Notably, alterations to drug prices within the first set of 10 medications are not slated for implementation until 2026. Over the subsequent two years, an additional 30 drugs will be selected for negotiation, with the commencement of negotiated pricing in 2027 and 2028.
A Pioneering Negotiation Process
Leigh Purvis, a principal focused on prescription drug policy at the AARP Public Policy Institute, emphasizes that “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.”
Objections from Big Pharma
Nevertheless, the pharmaceutical sector is mounting opposition against these drug negotiations. The pharmaceutical industry, in collaboration with industry allies, has initiated eight lawsuits aimed at thwarting the process. Prominent entities such as AstraZeneca, Astellas Pharma, Bristol Myers Squibb, Johnson & Johnson, Merck, and the pharmaceutical trade group PhRMA, along with the U.S. Chamber of Commerce, the Michigan Chamber of Commerce, and the Ohio Chamber of Commerce, have all lodged legal challenges.
The lawsuits hinge on novel legal theories that advocate for the cessation of drug negotiations. In a lawsuit submitted recently at the U.S. District Court in Delaware, AstraZeneca asserts that the provisions pertaining to drug negotiations within the Inflation Reduction Act are in conflict with another federal law, the Orphan Drug Act. This particular legislation is designed to stimulate the pharmaceutical industry’s investment in novel treatments for rare diseases.
Dave Fredrickson, the Executive Vice President of Oncology at AstraZeneca, posits that permitting the drug negotiations to proceed would result in U.S. patients “getting delayed access to scientific breakthroughs relative to other parts of the world.”
Seeking Supreme Court Resolution
Kelly Bagby, Vice President of Litigation for the AARP Foundation, underscores that the growing array of lawsuits, each situated in distinct judicial venues, is likely a strategic maneuver aimed at propelling a case to the U.S. Supreme Court. “What they’re trying to do is create as much momentum to get to the Supreme Court as quickly as possible,” Bagby notes.
Anticipatory Optimism Amidst Drug Negotiations
Seniors reliant on costly prescription medications are anxiously awaiting insights into the medications that might undergo discounted pricing through negotiation. Medicare enrollee Ellen Farmer, a resident of Massachusetts, narrates her predicament involving Xarelto, a blood thinner administered for the management of atrial fibrillation. Farmer’s monthly copayment for Xarelto, even post-insurance coverage, was projected to be an unaffordable $1,000. However, provisions under the Inflation Reduction Act have already led to substantial reductions in her copayments.
This development imbues Farmer with optimism that her medication costs could be further reduced through the process of drug negotiations. She underscores the urgency of such measures, emphasizing that countless individuals are confronted with the agonizing dilemma of choosing between financial stability and their health.
Broader Benefits and Savings
While the immediate reductions in drug prices through negotiation are anticipated to be realized only in 2026, several other provisions offer more prompt savings. Notably, in 2025, enrollees in Medicare’s Part D drug plans will witness an upper limit on their out-of-pocket prescription costs, capped at $2,000 annually.
Furthermore, the legislation mandates a cap on out-of-pocket insulin expenses for Medicare recipients, limiting the cost per dose to $35 commencing this year. Although this provision doesn’t extend to individuals covered by private insurance, three prominent insulin manufacturers have pledged to reduce prices on their respective products by 70% or more.
Equally significant, Medicare beneficiaries are now exempt from out-of-pocket expenses for recommended vaccines like shingles, pertussis, and tetanus.
Lastly, the legislation obligates drug manufacturers to issue federal rebates in the event of price hikes exceeding inflation levels. In response to this stipulation, Medicare announced plans to target 43 drugs marked by price increases surpassing this threshold. The resultant rebates are anticipated to yield savings for consumers, in addition to curbing Medicare’s expenditures.
Leigh Purvis of the AARP Public Policy Institute underscores that not only individuals requiring expensive prescriptions but also a broader spectrum of consumers will stand to benefit. The provisions dedicated to healthcare within the federal legislation are projected to yield a remarkable $173 billion in taxpayer savings over the coming decade, according to an analysis by the Committee for a Responsible Federal Budget. Purvis emphasizes that “they are going to see savings as a result of negotiation.”
