The first-ever negotiations between the federal government and pharmaceutical companies have led to agreements that will lower the prices of 10 treatments, reducing costs for the Medicare program and for some individual seniors, the Biden administration announced early Thursday morning.
This round of negotiations began one year ago and took place because of the Inflation Reduction Act, the law that Democrats in Congress passed on a party-line vote and that President Joe Biden signed two years ago. The new prices are for drugs covering a variety of conditions, including diabetes and inflammatory illnesses, and will take effect in January 2026.
The negotiation process is going to happen each year, with a new set of drugs each time.
“When these lower prices go into effect, people on Medicare will save $1.5 billion in out-of-pocket costs for their prescription drugs and Medicare will save $6 billion in the first year alone,” Biden said in a prepared statement. “It’s a relief for the millions of seniors that take these drugs to treat everything from heart failure, blood clots, diabetes, arthritis, Crohn’s disease, and more ― and it’s a relief for American taxpayers.”
The administration plans to release more specifics about the agreements, along with ― maybe ― more details on how it reached those figures for savings.
And though it remains unclear exactly what data the administration will reveal and when, the price reductions are expected to be the focus of remarks when Biden appears with Vice President Kamala Harris in a joint event Thursday in Maryland.
Thursday’s event has clear political relevance for Harris, the Democratic nominee for president who is campaigning against former President Donald Trump, the Republican nominee.
Harris was an early supporter of giving the government more power over drug prices. Biden administration budget proposals, which she has said she supports, have called for strengthening that power.
Republicans have long opposed giving the government this kind of leverage over drug prices. Project 2025, which the right-wing Heritage Foundation published as a governing blueprint for a new Trump presidency, calls for repealing the negotiation power.
And though Trump himself over the years has criticized the drug industry and said he would support price negotiation, while he was president he backed Republican leaders in the Senate who refused to consider drug pricing legislation that was moving through Congress.
The actual effects of these newly negotiated prices on individual seniors will depend on a variety of factors, including what drugs they take and which drug coverage plans they have. Many seniors will see only small savings or none at all.
And critics warn that the negotiation power could have downsides, including a chilling effect on innovation if diminished revenue for drug companies leads to a fall-off in investment.
“Medicine development is a long and complex process, and the negative implications of these changes will not be fully realized for decades to come,” Steve Ubl, president and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA), said on Wednesday when the announcement was imminent.
Supporters of the measure say these downsides are exaggerated or nonexistent, and they point out that the negotiations are just one tool among several reforms in the Inflation Reduction Act designed to reduce drug prices. Others include a $35 cap on insulin costs and a cap on out-of-pocket expenses for Medicare beneficiaries.