In a move aimed at easing public anger over soaring prescription drug costs, the Biden administration has secured substantial price cuts for 10 top-selling medications used by Medicare. The reductions, ranging from a modest 38% to a staggering 79%, are expected to save Medicare an estimated $6 billion in the first year alone. These cuts are a key component of the Inflation Reduction Act, signed into law in 2022, which for the first time granted Medicare the power to negotiate drug prices. The new prices will come into effect in 2026.
President Joe Biden, hailing the achievement as a victory over “Big Pharma,” emphasized the administration’s commitment to tackling the issue of high drug prices, which is a major concern for voters heading into the 2024 presidential election. Vice President Kamala Harris, whose tie-breaking vote in the Senate was crucial in passing the legislation, highlighted the importance of leveraging collective bargaining power to negotiate lower prices for essential medications.
While the administration celebrates the price cuts, drugmakers have expressed strong opposition, arguing that the move will not necessarily lower out-of-pocket costs for patients and could hinder future drug development. Several companies have already stated that they do not anticipate a significant impact on their businesses after seeing the confidential prices negotiated by the government.
The negotiated prices are reductions from the individual list prices, but do not reflect any existing rebates and discounts that the government may already be receiving. Nonetheless, the government’s estimated savings do account for these discounts. Notably, the price cuts have resulted in varied reactions from different pharmaceutical companies. Merck & Co’s Januvia, a diabetes drug, faces the steepest price cut of 79%, while Novo Nordisk’s insulin aspart products will see a 76% reduction. Other drugs on the list face reductions ranging from 68% to 38%.
Some companies, such as Johnson & Johnson and Price Pain BMS, have expressed concerns that the price cuts will lead to higher out-of-pocket costs for patients due to adjustments made by health insurers and pharmacy benefit managers (PBMs). PBMs, which act as intermediaries between drugmakers and insurers, negotiate rebates and discounts on behalf of payers. However, Novo and AstraZeneca, along with AbbVie, have stated that they are prepared to accept the new prices and remain in the Medicare program.
The administration is planning to expand its drug price negotiations in the future, with 15 additional drugs expected to be included in the next round of talks, scheduled to begin in February 2024. The government plans to provide more detailed information about how the 2026 price cuts were reached next year. This move represents a significant step in the ongoing battle to address the high cost of prescription drugs in the United States, with both positive and negative implications for patients, drugmakers, and the overall healthcare system.
