The price negotiation program, established by Democrats as part of the Inflation Reduction Act, is projected to save the government tens of billions of dollars in the coming years.
After his administration announced the first set of medications selected for Medicare price negotiations, President Biden vowed to continue standing up to the pharmaceutical industry over the cost of drugs.CreditCredit…Leigh Vogel for The New York Times
The Biden administration on Tuesday unveiled a long-awaited list of the first 10 medicines that will be subject to price negotiations with Medicare, kicking off a landmark program to reduce drug spending that is being fought by the pharmaceutical industry in court.
The medications — which treat diabetes, cancer and other conditions — are taken by millions of older Americans and cost Medicare billions of dollars annually. The Centers for Medicare & Medicaid Services selected the drugs through a process that prioritized ones that account for the highest Medicare spending, have been on the market for years and do not yet face competition from rivals. Additional medications will be selected for price negotiations in the coming years.
Drugs Selected for Price Negotiations
1. Eliquis, for preventing strokes and blood clots, from Bristol Myers Squibb and Pfizer
2. Jardiance, for diabetes and heart failure, from Boehringer Ingelheim and Eli Lilly
3. Xarelto,for preventing strokes and blood clots, from Johnson & Johnson
4. Januvia, for diabetes, from Merck
5. Farxiga, for diabetes, heart failure and chronic kidney disease, from AstraZeneca
6. Entresto, for heart failure, from Novartis
7. Enbrel, for arthritis and other autoimmune conditions, from Amgen
8. Imbruvica, for blood cancers, from AbbVie and Johnson & Johnson
9. Stelara, for Crohn’s disease, from Johnson & Johnson
10. Fiasp and NovoLog insulin products, for diabetes, from Novo Nordisk
The list of drugs had some overlap with what experts had anticipated. Its release was an important moment for Democrats, who have campaigned on a promise to lower the cost of prescription drugs. President Biden marked the occasion with remarks at the White House, in another sign that he intends to make lowering health care costs a theme of his 2024 re-election campaign.
“This is a long time in coming,” Mr. Biden declared after being introduced by a 71-year-old North Carolina man who has a rare blood cancer and diabetes. The president assailed the pharmaceutical industry over the cost of drugs, saying, “We’re going to keep standing up to Big Pharma, and we’re not going to back down.”
In a statement, Stephen J. Ubl, the chief executive of the Pharmaceutical Research and Manufacturers of America, the drug industry’s main lobbying group, called the announcement “the result of a rushed process focused on short-term political gain rather than what is best for patients.” He warned that the price negotiation program would “have significant negative consequences long after this administration is gone.”
Medicare gained the authority to negotiate the price of some prescription medicines when Congress passed the Inflation Reduction Act last year, a signature legislative achievement for Mr. Biden. The announcement on Tuesday is a key step toward those negotiations, which will unfold over the coming months, with the new prices taking effect in 2026.
The 10 selected medications range from very expensive drugs taken by relatively few older Americans to cheaper drugs taken by huge numbers of people. The blood cancer drug Imbruvica, which in a recent 12-month period was taken by 20,000 Medicare beneficiaries, has a sticker price of $17,000 a month. The blood thinner Eliquis, which was taken by 3.7 million beneficiaries, has a monthly sticker price under $600.
The negotiation program is projected to save the government $98.5 billion over a decade. It is also expected to eventually reduce insurance premiums and out-of-pocket costs for many older Americans, though the magnitude of those savings remains to be seen.
Some of the most significant savings for patients may accrue starting in 2028, when the first negotiated prices go into effect for drugs that are administered in clinics rather than taken at home. At that point, patients without supplemental insurance are likely to see their out-of-pocket costs drop for those drugs.
Other provisions of the Inflation Reduction Act — including a new $35 monthly cap on out-of-pocket costs for insulin and, starting in 2025, a $2,000 annual cap on patient costs for drugs taken at home — will most likely do more to directly save money for Medicare beneficiaries. The North Carolina man who introduced Mr. Biden at the White House, Steven Hadfield, said he now paid $35 a month for insulin instead of $400 a month.
Medicare already pays reduced prices for drugs on the list that was unveiled on Tuesday, reflecting rebates that are passed down by pharmacy benefit managers, the middlemen that negotiate discounts with manufacturers. Those rebates were not factored into the selection of which medicines would be subject to negotiations. But before passage of the Inflation Reduction Act, Medicare was explicitly barred from negotiating prices directly with manufacturers.
The medications selected for price negotiations are taken by millions of older Americans and cost Medicare billions of dollars annually.Credit…Matt Rourke/Associated Press
Republicans in Congress opposed authorizing Medicare to negotiate prices, criticizing the move as tantamount to imposing government price controls.
The pharmaceutical industry says the negotiation program will lead to fewer new drugs, particularly for conditions that predominantly affect older people, and will result in other unintended consequences that will harm patients. Manufacturers have warned that the program discourages them from developing traditional synthetic pills because those drugs can be subject to price negotiations relatively quickly after they reach the market.
Six pharmaceutical manufacturers — Astellas Pharma, AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb, Johnson & Johnson and Merck — have taken the Biden administration to court in an attempt to block the negotiation program. The industry’s main trade group and the U.S. Chamber of Commerce have also filed suit.
The suits make a variety of constitutional claims, including that a requirement that drugmakers negotiate or pay a fine violates the Fifth Amendment’s prohibition on the taking of private property for public use without just compensation.
The drug industry fears that the negotiation program will open the door for lower prices in the private market. When the government’s lower prices are made public, experts say, pharmacy benefit managers negotiating on behalf of the privately insured will have greater leverage to demand deep discounts.
Now that the list of drugs is public, their makers have until Oct. 1 to declare whether they will participate in negotiations with the government. Companies that decline to negotiate must either pay a large excise tax or withdraw all of their products from both Medicare and Medicaid, the federal-state program that provides health coverage to low-income people. In statements on Tuesday, pharmaceutical manufacturers whose products made the list were circumspect about their next steps, emphasizing that they were committed to ensuring access for patients.
Polling by KFF, a health policy research organization, has found broad, bipartisan public support for allowing Medicare to negotiate drug prices. In a survey late last year, 89 percent of Democrats and 77 percent of Republicans said they favored the plank of the Inflation Reduction Act that authorizes negotiations.
But Mr. Biden and his fellow Democrats face the challenge of drawing attention to the negotiation program. In a KFF survey in July, only a quarter of Americans were aware of its existence.
Democrats had long tried to do away with the provision that barred direct negotiations with drugmakers after it was written into law in 2003, when President George W. Bush signed legislation that created the Medicare Part D program to cover prescription drugs taken at home.
On Tuesday, Senator Amy Klobuchar, Democrat of Minnesota, gave credit to Mr. Biden and AARP, which represents older Americans and ran an aggressive advertising campaign in support of getting rid of the prohibition on negotiations. She called that provision “a sweetheart deal” for the pharmaceutical industry.
Ms. Klobuchar, who is running for re-election in 2024, said the Inflation Reduction Act would figure prominently in her campaign.
“We know that 80 percent of the public is with us,” she said.