The Centers for Medicare and Medicaid Services on Tuesday announced the first 10 prescription drugs that will be subject to Medicare price negotiations under the Inflation Reduction Act, a critical step in the Biden administration’s attempt to drive down the high cost of prescription drugs for older people.
Medicare provides health insurance coverage to 65 million people in the U.S., according to KFF, a nonpartisan group that studies health policy issues. While the program wields enormous power over the costs of other aspects of medical care, dictating how much doctors and hospitals can be paid for medical services, it has been barred from negotiating drug costs.
That will change next year, when Medicare for the first time will be able to directly haggle with drugmakers over prices for the costliest medications. The negotiated prices will go into effect in 2026.
The drugs selected to undergo negotiations are:
- Eliquis, a blood thinner
- Xarelto, a blood thinner
- Januvia, a diabetes drug
- Jardiance, a diabetes drug
- Enbrel, a rheumatoid arthritis drug
- Imbruvica, a drug for blood cancers
- Farxiga, a drug for diabetes, heart failure and chronic kidney disease
- Entresto, a heart failure drug
- Stelara, a drug for psoriasis and Crohn’s disease
- Fiasp and NovoLog, for diabetes
Together, the 10 drugs accounted for $50.5 billion of Medicare spending from June 1, 2022 to May 31, 2023, according to the CMS.
Drugmakers will have 30 days to sign an agreement to participate in the negotiations, or they may face tax penalties. The tax could be lifted if a drugmaker chooses to pull its drug from the Medicare program entirely. Doing so, however, would cut the company off from a huge share of the market.
The negotiation provision has sparked legal action from major drug companies, including Johnson & Johnson, Merck and Bristol Myers Squibb, claiming it would reduce spending in research and development, leading to fewer breakthroughs for lifesaving treatments.
“Today’s announcement is the result of a rushed process focused on short-term political gain rather than what is best for patients,” Stephen Ubl, the president and CEO of the Pharmaceutical Research and Manufacturers of America, a group that represents the drug industry, said in a statement. “Politics should not dictate which treatments and cures are worth developing and who should get access to them.”
Other experts, however, stress the importance of lowering out-of-pocket costs older people see at the pharmacy.
“Definitely the negotiation process is going to meet its goal of capturing those drugs that are either used by a lot of people, that are very expensive or both,” Leigh Purvis, a prescription drug policy principal at the AARP Public Policy Institute, said at a briefing ahead of Tuesday’s announcement.
Tuesday’s list is merely a starting point.
In 2027, negotiated prices will go into effect for 15 more drugs, followed by another 15 drugs in 2028 and 20 more in each subsequent year.
The negotiation process applies to drugs covered under Medicare Part D that don’t have generic or other comparable alternatives. Medicare Part D drugs are medications taken at home; Part B drugs, which will eventually be included, are drugs administered by providers in facilities, such as chemotherapy.
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