Medicare Unveils Results of First-Round Drug Price Negotiations

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The Inflation Reduction Act provides Medicare with the right to directly negotiate with drug companies as a way to improve access to various brand name Part B and D drugs. Never before has the federal government been able to bargain with drugmakers over the costs of the drugs they produce, and it could potentially serve useful to counteract budget increases.

"Experience in other countries shows that once introduced, price controls become a convenient tool to address government budget overruns," noted Ed Schoonveld, a value & access advisor for Schoonveld Advisory who also serves on Pharma Commerce's Editorial Advisory Board.

Keeping that in mind, on Thursday, Medicare officials released results of the first round of prescription drug negotiations for individuals with Medicare Part D, which would go into effect by 2026.^1,2 People enrolled in the program are also expected to save $1.5 billion in out-of-pocket costs once those new prices are enacted.

The first 10 drugs that will see lower prices go into effect include:

1. Eliquis (by BMS and Pfizer), a blood thinner for the prevention and treatment of blood clots, which will receive a 56% discount off of the 2023 list price
2. Jardiance (by Boehringer Ingelheim and Eli Lilly) diabetes, heart failure, and chronic kidney diseases, which will receive a 66% discount off of the 2023 list price
3. Xarelto (by Johnson & Johnson) a blood thinner for the prevention and treatment of blood clots, and reduction of risk for patients with coronary or peripheral artery disease, which will receive a 62% discount off of the 2023 list price
4. Januvia (by Merck) for the treatment of diabetes, which will receive a 79% discount off of the 2023 list price
5. Farxiga (by Merck) for the treatment of diabetes, heart failure, and chronic kidney disease, which will receive a 68% discount off of the 2023 list price
6. Entresto (by Novartis) for heart failure, which will receive a 53% discount off of the 2023 list price
7. Enbrel (by Amgen) for the treatment of rheumatoid arthritis, psoriasis, amd psoriatic arthritis, which will receive a 67% discount off of the 2023 list price
8. Imbruvica (by AbbVie and Johnson & Johnson) for the treatment of blood cancers, which will receive a 38% discount off of the 2023 list price
9. Stelara (by Johnson & Johnson) for the treatment of psoriasis, psoriatic arthritis, Crohn’s disease, and ulcerative colitis, which will receive a 66% discount off of the 2023 list price
10. Fiasp, NovoLog (by Novo Nordisk) for the treatment of diabetes, which will receive a 76% discount off of the 2023 list price

The selected drugs were among those with the highest total spending when it came to Medicare Part D. Had these negotiated prices gone into effect in 2023 as opposed to 2026, Medicare would have saved an estimated $6 billion.

As noted above, this only represents the first round of negotiations. As part of Medicare’s drug price negotiation program, additional drugs will be chosen annually. Come next year, Medicare will be selecting as many 15 other drugs to be covered under Part D for negotiation, up to an additional 15 Part B and D drugs in 2026, and as many as 20 drugs every year following.

However, when it comes to this development, life science investors in Washington feel as though these negotiations devalue intellectual property.

“All we're really doing here, is doing an end run around long-standing intellectual property protections and now saying, guess what? You develop a drug, you get nine years if it's a small molecule, to recoup your investment, maybe make profit, reinvest that profit 13 years for a biologic. So even if you have extra time on your patent or your exclusivities, it doesn't really matter,” explained John Stanford, executive director of Incubate, which strives to educate policymakers on the role of venture capital.

“We've changed all of our models to say, okay, how much can reasonably be returned in that time? And I think something that people don't appreciate is those first two years of post- approval, you're not ready to sell on day one. You have to figure out manufacturing processes at scale. You have to figure out negotiations with payers, which usually require you having some real world data proving its efficacy. You have to educate physicians and patients that this new product for their therapeutic areas now there and so what you see in the lifetime of a drug is sales take a lot of time to build up.”

References

1. FACT SHEET: Biden-⁠Harris Administration Announces New, Lower Prices for First Ten Drugs Selected for Medicare Price Negotiation to Lower Costs for Millions of Americans. The White House. August 15, 2024. Accessed August 16, 2024. https://www.whitehouse.gov/briefing-room/statements-releases/2024/08/15/fact-sheet-biden-harris-administration-announces-new-lower-prices-for-first-ten-drugs-selected-for-medicare-price-negotiation-to-lower-costs-for-millions-of-americans/

2. Negotiating for Lower Drug Prices Works, Saves Billions. US Department of Health and Human Services. August 15, 2024. Accessed August 16, 2024. https://www.hhs.gov/about/news/2024/08/15/historic-first-biden-harris-administration-successfully-negotiates-medicare-drug-prices-delivers-promise-lower-prescription-drug-costs-american-seniors.html