WASHINGTON — In an effort to lower drug costs, Medicare will begin price negotiations with drug manufacturers on Thursday for the 10 most costly prescriptions covered by Medicare.
It marks the first step in historic negotiations under the Medicare Drug Price Negotiation Program. In August 2022, President Joe Biden signed the Inflation Reduction Act into law, allowing Medicare to directly negotiate prices of certain high-expenditure drugs lacking generic competition with drug companies for the first time in U.S. history.
“Today is another milestone on the march to ensure people with Medicare get fair prices for prescription drugs,” said Xavier Becerra, the secretary for the Department of Health and Human Services, in a statement. “I am confident that this process will lead to lower prices, putting an end to exorbitant price gouging by pharmaceutical companies.”
Between June 2022 and May 2023 the 10 drugs cost the federal government $50.5 billion. During a call with reporters on Wednesday evening, Biden administration officials did not disclose the amount of savings that the initial price offers would generate.
The price negotiations are expected to continue until Aug. 1, with the final prices announced on Sept. 1. The negotiated prices for these drugs will become effective beginning in 2026.
The ten drugs currently subject to negotiation include Eliquis, a blood thinner from Bristol Myers Squibb and Pfizer; Jardiance, a drug for Type 2 diabetes and heart failure from Boehringer Ingelheim and Eli Lilly; and Xarelto, a blood thinner from Johnson & Johnson.
Locally, 16.5% of Berkshire County residents are insured by Medicare, according to Data USA. However, a JAMA Network Open study found that nearly 1 in 5 adults ages 65 and older didn’t take their medications fully as prescribed in 2022 because of cost concerns.
“We have the world’s best medicine, but the prices are too high,” said Jeromie Ballreich, an associate research professor at the Johns Hopkins Bloomberg School of Public Health.
Ballreich acknowledged that negotiating prices could potentially limit innovation in medicine but said that the Inflation Reduction Act negotiations are worth the trade-off to ensure that Americans have increased access to these drugs.
“Innovative medicines are not beneficial to society if patients don’t have access to them, and access is conditional on cost,” Ballreich said.
In a Data for Progress survey released in August 2023, 84% of voters expressed support for Medicare drug price negotiation — including 75% of Republicans and 92% of Democrats.
In future years, the Centers for Medicare and Medicaid Services will select 15 more drugs for negotiation in 2027 and 2028, and up to 20 more drugs each year after that.
Stacie B. Dusetzina, a professor in the Department of Health Policy at Vanderbilt University School of Medicine, said it is unclear how much relief patients will get from the drug negotiations in 2026 but that patients should see reduced costs in the future as more and more drugs are negotiated.
In addition to negotiating costs with pharmaceutical companies, the Inflation Reduction Act also made several changes to the Medicare Part D drug benefit. This includes a cap on out-of-pocket yearly maximum prescription drug costs. Part D enrollees will pay no more than $3,300 in annual drug costs in 2024. By 2025, out-of-pocket costs will not exceed $2,000.
“If you compare that to even last year where the same drug could have cost you upwards of $10,000 or $15,000 out of pocket, we’re really seeing substantial improvements,” Dusetzina said. “For Medicare beneficiaries, it is a really transformative change that can save people literally thousands of dollars out of pocket every year.