Medications that prevent blood clots and help with diabetes will be among the first 10 drugs subject to price negotiations between the federal government and drug manufacturers.
The U.S. Department of Health and Human Services (HHS) on Tuesday announced the list of 10 medications , saying Medicare enrollees paid a total of $3.4 billion in out-of-pocket costs for the drugs in 2022.
Democrats have highlighted the new program for price negotiations — which federal legislation initiated last year — as a way to deliver big savings for both seniors and the federal Medicare program. Manufacturers, meanwhile, have warned it will stifle innovation by cutting funds for research.
Negotiations will occur in 2023 and 2024, the government said, with prices effective in 2026.
"For far too long, pharmaceutical companies have made record profits while American families were saddled with record prices and unable to afford life-saving prescription drugs," HHS Secretary Xavier Becerra said in a statement.
The negotiations are part of how Medicare is funding richer drug coverage for all beneficiaries in the next several years, not just those who happen to take the 10 medications, said Juliette Cubanski, deputy director of the Program on Medicare Policy at KFF, a California-based research group.
"Some of the drugs … are on that list not because they are expensive on a per-capita basis but because so many Medicare beneficiaries use them that the price times the quantity equals a very large number," Cubanski said. "Other drugs on this list are there because while few beneficiaries use them, the price times the quantity equals a very large number."
The program for price negotiations was one of several provisions for lowering medication expenses in the Inflation Reduction Act, which President Joe Biden signed into law in August 2022. It will begin within the government's Part D drug benefit, which is utilized by about 53 million of the 65 million enrollees in Medicare.
The law also mandated rebates to the government starting this year if drug companies raise prices too quickly. In 2025, Medicare will cap out-of-pocket expenses for individuals using Part D drug benefits at $2,000.
The new limit will be particularly helpful, Cubanski said, for seniors who take drugs like Imbruvica, a cancer medicine on the list of 10 drugs. Depending on their Part D drug coverage, a senior taking this medication might face as much as $10,000 in out-of-pocket costs, she said.
Among most Medicare beneficiaries in Minnesota last year, the average out-of-pocket expense for Imbruvica was $6,349, the federal government estimates.
The negotiated prices and required rebates will help "provide funding for the valuable benefit enhancements," Cubanski said.
Manufacturers have warned for decades that placing such pricing power in the hands of the federal government would hurt the development of new medications. On Tuesday, they argued that prices for the 10 selected medications already are discounted through negotiations with insurance companies that sell government-backed Medicare Part D drug plans.
"Today's announcement is the result of a rushed process focused on short-term political gain rather than what is best for patients," said Stephen J. Ubl, president of the Pharmaceutical Research and Manufacturers of America, in a statement.
But U.S. Sen. Amy Klobuchar, D-Minn., said price negotiations are an overdue response to high drug costs that seniors and the Medicare program have struggled with for too long.
Klobuchar said the Inflation Reduction Act incorporated her bill to end an earlier ban on Medicare negotiating drug prices. She's proposed legislation that would increase the number of drugs subject to negotiations.
"It is a big deal that we are finally kicking this off," she said.
Drugs in the first round of negotiations include the blood thinners Eliquis and Xarelto as well as Jardiance, a diabetes medication.
Overall, the 10 drugs accounted for $50.5 billion in gross covered prescription drug costs for the Medicare Part D program, according to HHS. That was about 20% of Part D gross covered prescription drug costs between June 1, 2022, and May 31, 2023, the government said.
Gross costs don't include discounts, rebates or other price concessions that insurers might negotiate with drug companies.
Over the next few years, the federal government will select as many as 50 more drugs for negotiations. Those prices will take effect in 2027 or later.
The first 10 are drugs covered through Part D and typically dispensed at pharmacies. In the future, the government also can negotiate prices for a group of Part B medicines generally administered by health care professionals.
Last year, about 9 million Medicare Part D enrollees used the 10 drugs selected. The most common medication was Eliquis (3.5 million) followed by Jardiance and Xarelto (1.3 million each).
Other drugs on the list include Januvia and Farxiga, both of which treat diabetes, as well as the heart failure drug Entresto, the rheumatoid arthritis drug Enbrel and Stelara, which treats psoriasis, psoriatic arthritis and Crohn's disease. The program also will include insulins sold under the names Fiasp and NovoLog.
Manufacturers and the trade group for drug companies have filed a number of lawsuits to block the price negotiations, Cubanski said. She noted that litigation has been brought in different courts that could generate conflicting rulings.
"It does seem like there is a legal strategy here designed to perhaps kick this all the way up to the U.S. Supreme Court," Cubanski said. "... But we are, I think, a long way away from that legal battle."
