The first round negotiated prices A list of ten drugs was unveiled by the White House on Thursday amid great fanfare, with Democrats celebrating it as the culmination of years of development.
Government officials touted savings of $6 billion for taxpayers and about $1.5 billion less out-of-pocket costs for seniors in 2026.
What you should know:
The negotiations worked – for the most part
The drug companies said the process was not legitimate negotiations, but all agreed to participate and none took their drugs out of the Medicare program.
“The negotiations were comprehensive. They were intense. Both sides had to come to a good deal,” Health Minister Xavier Becerra said of the talks.
Federal officials held three meetings with each pharmaceutical company involved to discuss the offers and counteroffers and to reach what officials said was a “mutually acceptable price” for the drug.
At these meetings, prices were negotiated for five of the drugs. The government representatives accepted Counter offers from the manufacturer for four of these medications.
For the other five drugs, Medicare authorities made a final written offer to the pharmaceutical companies. If the offer had been rejected, the companies would have had to remove their drugs from Medicare or face massive fines.
“I think CMS [the Centers for Medicare & Medicaid Services] “Manufacturers have a lot of incentives, especially in the context of litigation, to make this look as much like a negotiation as possible, and they realize that if they had come in with an offer of, you know, zero dollars, the manufacturers would have walked away from the negotiating table and certainly would have used that information in the context of ongoing and future litigation,” said Ross Margulies, partner at Manatt Health.
Democrats see gigantic victory and possible climax of their campaign
President Biden and Vice President Harris took a resounding victory lap Thursday after the announcement.
“For years, the pharmaceutical industry has prevented Medicare from negotiating lower drug prices,” Biden said. “This time, we’ve finally beaten the pharmaceutical industry.”
The announcement came two weeks ahead of the legal deadline and days before the start of the Democratic National Convention, an indication that the Biden administration – including Democratic presidential candidate Harris – wants to operate the savings to campaign.
“For years, the pharmaceutical industry has inflated the prices of life-saving drugs, often charging many times the cost of manufacturing them, just to increase their profits. Millions of Americans have suffered as a result,” Harris said. “I have worked my entire career to hold the perpetrators accountable and lower the cost of prescription drugs.”
Democrats in Congress also praised the savings.
“Excessive prices should never deny Americans access to the life-sustaining medicines they need. This announcement will save patients and taxpayers billions of dollars, and those savings will grow even further as Medicare negotiates prices on even more drugs,” Senator Amy Klobuchar (D-Minn.) said in a statement.
“These lower drug prices, negotiated by the Biden-Harris administration using Democratic authority, will make a huge difference for countless patients when they take effect in 2026,” Senator Patty Murray (D-Washington) said in a statement.
We don’t really know how much Medicare actually saves on each drug.
The Biden administration touted massive savings, and Biden even posted a graphic on social media showing the discounts, which ranged from 38 to 79 percent. All but one drug had a savings of at least 50 percent.
However, the figures published by CMS are based on a drug’s list price. Discounts and rebates not obtained through negotiations often result in Medicare paying less than the list price. However, this amount is secret.
Because Medicare does not disclose the net price it pays for drugs, it is arduous to determine the exact savings achieved through negotiations.
“While there are cases where Medicare could pay the list price, it is unlikely that this was the case for any of the 10 negotiated drugs,” said Bailey Reavis, manager of federal relations at the nonprofit consumer health organization Families USA.
Medicare beneficiaries typically do not pay the full list price. Some people pay copayments or deductibles based on a percentage of the list price. For individual patients, however, the amount of savings depends largely on their insurance plan.
“List price only matters in very, very few cases,” Margulies said. “Nobody pays list price, right? I don’t think that comparison is helpful and exaggerates the success of the negotiations here.”
Pharmaceutical companies raised objections, but also suggested that the deal would not do much harm
Almost immediately after the first prices were announced, pharmaceutical companies and allied groups condemned the “maximum fair price” and described the negotiation process as government price fixing.
(*5*) Bristol Myers Squibb, the maker of the blood thinner Eliquis, said in a statement.
“The government is using the IRA pricing system to make political headlines, but patients will be disappointed when they learn what it means for them,” said Steve Ubl, president and CEO of PhRMA, the Pharmaceutical Research and Manufacturers of America.
But despite all the opposition, many executives explained to shareholders and analysts that the final price offers would not have a significant impact on the respective Final results.
“Now that we have seen the final price, we are increasingly confident in our ability to manage the impact of the IRA on Eliquis,” said Chris Boerner, CEO of Bristol Myers Squibb, during a conference call with analysts on July 26.
Wall Street was able to largely ignore any negative impact on Thursday as many companies ended the day with relatively unchanged share prices.
Chris Meekins, an analyst at Raymond James, wrote in a research note that the industry is at an advantage.
“Our conclusion after reviewing the negotiated rates is that the pharmaceutical companies have won compared to what could have happened,” he wrote. “The industry would have preferred never to negotiate at all, but the impact is far less than politicians claim, and the industry as a whole seems to be absorbing this fine so far.”
The program is to be expanded in the future – if it still exists
According to government officials, this first round of talks has laid the foundation for successful future negotiations.
CMS is expected to select the next 15 drugs covered by Part D by February 1, and their prices will take effect in 2027. Starting in 2028, the number will enhance to 20 drugs.
The negotiated prices remain in effect until the drugs are no longer eligible for the program.
“What we’ve created, I think, is a really solid foundation for future government drug price negotiations,” said Stacy Sanders, competition commissioner for the Department of Health and Human Services. “This process was honest and thoughtful. It involved a real back and forth with the drug manufacturers.”
Much depends on the November election and the next administration. Republicans have condemned the IRA in general and the Medicare negotiation process in particular, and have indicated that they would likely try to repeal the provision if they control the government next year.
“Addressing the high cost of prescription drugs is one of Congress’s top priorities, but it cannot be done in a way that stifles innovation and increases instability for retirees on fixed incomes,” said Republican Rep. Brett Guthrie of Kentucky, chairman of the Energy and Commerce Subcommittee on Health.
It’s unclear what former President Trump would do if he wins another term. He is critical of the pharmaceutical industry but has abandoned his 2016 campaign promise to let Medicare negotiate drug prices.
Separately, pharmaceutical companies have filed a number of lawsuits to stop the practice and have it declared unconstitutional. So far, they have not been successful, but many of the cases are still in the legal system.
Updated at 12:14
