The United States has successfully negotiated lower prices for 10 top-selling prescription drugs used by Medicare, achieving discounts of up to 79%. This major victory, a result of President Joe Biden’s Inflation Reduction Act signed into law in 2022, is expected to save the government $6 billion in its first year of implementation. The new prices, set to take effect in 2026, represent a significant step towards addressing public concerns about the high cost of prescription drugs, a key issue in the upcoming 2024 presidential election.
President Biden, celebrating the accomplishment, stated that the administration had “finally beat Big Pharma.” The Inflation Reduction Act marked the first time Medicare was granted the authority to negotiate drug prices for some of the most expensive medications it covers, impacting a total of 66 million beneficiaries. Vice President Kamala Harris, instrumental in passing the law with her tie-breaking Senate vote, emphasized the importance of using Medicare’s collective bargaining power to negotiate better deals for Americans.
While the negotiated prices represent cuts to the individual list prices, they do not reflect any rebates and discounts that the government may already be receiving. However, the government’s estimated savings from the negotiations do take these existing discounts into account. The administration anticipates that the lower prices will also result in $1.5 billion in savings for Medicare beneficiaries in terms of out-of-pocket costs for these medications in 2026.
The steepest price cuts were levied on Merck & Co.’s diabetes drug Januvia (79%) and Novo Nordisk’s insulin aspart products (76%). The remaining eight drugs on the list face price reductions ranging from 68% to 38%.
While the government has refrained from disclosing the specific net prices of the medications, citing confidentiality concerns, industry analysts are closely analyzing the differences between the newly discounted prices and the ultimate net prices.
Drugmakers have expressed their opposition to the new discounts, arguing that they may not necessarily lower out-of-pocket costs for patients and could potentially hinder future drug development. However, despite the price reductions, several pharmaceutical companies have indicated that they do not expect a significant impact on their businesses.
Professor Stacie Dusetzina of Vanderbilt University, a healthcare expert, notes that while the new discounts and savings are encouraging, they are not so aggressive as to cause major concern for the industry. She believes that companies will still be able to generate profits and maintain incentives for innovation.
The stock market reflected mixed reactions to the price negotiations. Shares of Eli Lilly, Pfizer, Merck, and AbbVie saw slight decreases in morning trading, while Amgen and Bristol Myers Squibb’s stocks rose over 1%, and Novo Nordisk’s U.S.-listed shares climbed nearly 2%.
Despite the overall positive sentiment, some drug companies voiced concerns about the impact on patient affordability. Bristol Myers Squibb, maker of the blood thinner Eliquis, stated that the 56% price cut to their drug would not address the root cause of patient affordability – out-of-pocket costs that are determined by health insurers and pharmacy benefit managers (PBMs).
PBMs are companies that handle prescription drug benefits for health insurance companies, large employers, and Medicare prescription drug plans. They negotiate fees and volume-based discounts, known as rebates, on behalf of payers with drugmakers and pharmacies.
Johnson & Johnson, whose Crohn’s disease medicine Stelara and blood thinner Xarelto face list price cuts of 66% and 62% respectively, claimed that patients would face higher costs as a result of the price cuts.
Novo and AstraZeneca, whose diabetes drug Farxiga has had its list price cut by 68%, asserted that they were not prepared to withdraw from the Medicare program due to the new prices. A spokesperson for AbbVie, whose cancer drug Imbruvica will face the least steep percentage cut of 38%, commented that the negotiated price fell within the range they had anticipated.
The Medicare agency confirmed that it accepted revised counteroffers proposed by the drug manufacturers for four of the 10 selected drugs, while the remaining five drug companies accepted the government’s final offers. The administration had previously released a list of the 10 most expensive drugs covered by Medicare that would be subject to price negotiations.
The pharmaceuticals industry has actively opposed the Medicare drug price negotiations, with several companies launching legal challenges against the administration and warning of potential cuts to drug development programs. The next round of Medicare drug price talks is scheduled to begin in February and is expected to include 15 additional drugs. Government officials are expected to provide more detailed information about the 2026 price cuts next year.
