Biden Unveils First 10 Drugs For Medicare Price Negotiation

The federal government just identified the first 10 medications that will be subject to direct price negotiations with manufacturers, as part of a major new initiative to reduce prescription drug costs in Medicare.

The list includes a pair of widely used blood thinners, Eliquis and Xarelto, as well as the cancer therapy Imbruvica. It also includes Farxiga, Jardiance and Januvia, all of which treat diabetes.

All told, the 10 drugs on the list accounted for $50.5 billion in total spending in Medicare’s outpatient prescription drug program for the period between June 1, 2022, and May 31, 2023, according to the Department of Health and Human Services. That’s about one-fifth of what the program, known as Part D, spent on all prescription drugs during that period.

The announcement represents the first step in a process set to unfold over the coming year, with the government collecting data and public input, and then exchanging price offers with manufacturers over how much Medicare will pay for the named drugs.

This mechanism for negotiating prices exists because of the Inflation Reduction Act, President Joe Biden’s signature legislation that Democrats in Congress passed on party-line votes last year.

Whether the new scheme remains in place depends on whether its critics, including leaders of the drug industry and the Republican Party, manage to weaken, block or repeal it through new legislation and lawsuits.

If the negotiation process works as its champions hope, manufacturers will eventually agree to significant reductions in what they currently charge for these drugs.

The lower prices for these first 10 drugs would take effect in 2026, producing savings for Medicare ― and, by extension, the taxpayers who help fund it.

It would also mean savings for individual Medicare beneficiaries, mainly seniors and people with disabilities, who end up paying for drugs through premiums and out-of-pocket expenses. Those out-of-pocket expenses can be hundreds or thousands of dollars a year per drug, according to HHS.

Alternatively, manufacturers could refuse to take what the government ends up offering. But in that case, they would face stiff financial penalties unless they choose to exit Medicare and other public programs altogether ― an option that would entail its own serious costs, given how much the companies rely on government insurance programs for revenue.

“For far too long, Americans have paid more for prescription drugs than any major economy,” Biden said Tuesday morning in a prepared statement. “And while the pharmaceutical industry makes record profits, millions of Americans are forced to choose between paying for medications they need to live or paying for food, rent, and other basic necessities. Those days are ending.”

The governments of France, Germany, Japan and other economically advanced nations have long used their own versions of negotiation or regulation to keep drug prices down, which is why they and their citizens pay so much less than their American counterparts.

Now the U.S. government can negotiate prices, too, although in a much more limited way. The new authority extends only to what Medicare pays, which means it has no direct effect on private insurance rates. And to qualify for negotiation, drugs must satisfy several conditions tied to factors like whether they already face competition and how long they’ve been on the market.

But the new initiative’s reach is set to expand over time. The government can keep choosing new drugs for price negotiation, based on parameters that the Inflation Reduction Act has established, with the annual number of drugs selected for negotiation increasing to 20 in coming years.

And lawmakers in the future could always pass legislation to broaden the types of drugs subject to negotiation, as Biden proposed in his most recent budget. They could even extend negotiated prices to private insurance, an idea that advocates have long supported but one that’s never had quite enough votes ― even among Democrats ― to become law.

The possibility that the government could get even more leverage over prices in the future helps explain the strong opposition from the drug industry and its allies.

They have sued to block negotiation from going forward, arguing that it is unconstitutional. And they have long argued to lawmakers ― and to the public ― that negotiation will push down prices in ways that reduce the financial rewards for innovation, leading to less investment in research and ultimately fewer medical breakthroughs.

“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,” Stephen J. Ubl, president of the the Pharmaceutical Research and Manufacturers of America, or PhRMA, said in response to the administration’s announcement.

“The cancer moonshot will not succeed if this administration continues to dismantle the innovation rocket we need to get there,” Ubl added. “The harm will spread beyond cancer and impact people with rare diseases, mental health illnesses and other terrible diseases.”

Many Republicans make the same argument. None voted for the Inflation Reduction Act when it went through Congress, and last year, a caucus representing the majority of House Republicans endorsed repeal of the new negotiation power, calling it a form of “price controls.”

But the idea of directly negotiated drug prices is highly popular, even among self-identified Republican voters, according to polls. It also has the support of both liberal and moderate Democratic leaders, as well as high-profile and widely trusted advocates like AARP.

“Allowing Medicare to negotiate prices for these first 10 drugs will finally bring much needed access and relief to American families, particularly older adults,” Nancy LeaMond, AARP’s executive vice president and chief advocacy and engagement officer, said in a prepared statement. “We cannot overstate how monumental this law is for older Americans’ financial stability and overall health.”

Biden hopes to make the new reforms a big part of his reelection campaign, highlighting both Republican and drug industry opposition to negotiation as well as his proposals to expand it. He also hopes to spread the word about other reforms to reduce drug prices for seniors, like a cap on their out-of-pocket prescription expenses that was also part of the Inflation Reduction Act and that will start to phase in next year.

According to a recent Pew survey, health care costs are one of the top concerns for U.S. voters, second only to inflation, as the 2024 election cycle kicks off.

It’s difficult to say exactly what impact negotiation will have on the industry, although it’s nearly certain that some manufacturers will lose some revenue because of it, according to Michael Levesque, a senior vice president at Moody’s Investors Service.

“There’s certainly going to be a reduction in pricing, on behalf of that [Medicare] population, and that’s going to hit the company’s earnings,” Levesque told HuffPost this week.

But, Levesque added, “this is still a very highly rated industry … We have companies with long histories of innovation ― they’re going to keep introducing new products, they’re still going to capture breakthroughs and technologies, and produce advances in medicine.”

• Eliquis (prevents blood clots and strokes)
• Jardiance (treats Type 2 diabetes)
• Xarelto (prevents blood clots and strokes)
• Januvia (treats Type 2 diabetes)
• Farxiga (treats Type 2 diabetes)
• Entresto (treats heart failure)
• Enbrel (treats rheumatoid arthritis and other autoimmune conditions)
• Imbruvica (treats several types of leukemias and lymphomas)
• Stelara (treats plaque psoriasis, psoriatic arthritis, Crohn’s disease and ulcerative colitis)
• Fiasp; Fiasp FlexTouch; Fiasp PenFill; NovoLog; NovoLog FlexPen; NovoLog PenFill (insulin products)