President Joe Biden is finally making good on his campaign promise to reduce the cost of prescription drugs…sort of.
Government officials with the Centers for Medicare & Medicaid Services (CMS) will soon conduct their first-ever price negotiations for 10 prescription drugs. The drugs were handpicked from a list of more than 7,500 medications and were chosen because they represent a high cost to consumers and Medicare and/or do not have direct competitors.
List of medications being negotiated:
- Eliquis (blood thinner)
- Jardiance (diabetes)
- Enbrel (arthritis)
- Entresto (heart failure)
- Farxiga (diabetes/heart failure)
- Xarelto (blood thinner)
- Imbruvica (leukemia)
- Stelara (psoriasis/inflammatory disorders)
- Fiasp & NovoLog (diabetes)
- Januvia (diabetes)
Over the past year, Americans spent $3.4 billion to obtain these drugs and Medicare spent over $50 billion.
The negotiation process is expected to take some time, with the first offers being made to pharmaceutical companies in February of next year and the new prices taking effect in 2026. Any drugmaker that refuses to take part in the negotiations will be forced to remove their products from Medicare/Medicaid coverage or pay taxes of up to 95%.
The goal of the program is “to basically make drugs more affordable while also still allowing for profits to be made,” says Gretchen Jacobson, a researcher with the Commonwealth Fund.
The negotiations are made possible through the Inflation Reduction Act of 2022 (IRA), which aims to curb inflation by lowering the cost of prescription drugs, reducing the federal deficit, and investing in domestic energy production.
Spending well over $300 billion annually, Medicare is by far America’s largest purchaser of prescription drugs. For the first time in US history, the government-funded program will have the ability to negotiate directly with drugmakers to achieve lower prices on a limited number of drugs per year.
The goal is to save $25 billion annually on prescription drugs by 2031.
A majority of these savings will go to Medicare, which plans to pass the benefits to consumers by establishing a cap of $2,000 per year for how much its patients must pay out of pocket for prescription drugs. The IRA has already established a cap of $35 a month for how much Medicare patients must pay for insulin. The agency plans to add 15 medications to the list by 2027, an additional 15 by 2028, and 20 each year after that.
The news of upcoming negotiations is a light at the end of the tunnel for many aging Americans who are forced to spend thousands of dollars each year on living-saving medication. According to a study conducted by the Commonwealth Fund, nearly 10% of Medicare patients aged 65 and older will occasionally skip or ignore prescriptions due to cost.
“No senior should have to choose between whether they fill their prescription or fill their fridge,” said Vice President Kamala Harris this week.
Not surprisingly, Big Pharma fiercely opposes the price negotiations and has already filed a series of lawsuits against the federal government.
Primary arguments include:
- The powers granted to Medicare by the IRA are unconstitutional
- The cost savings Medicare is trying to achieve will hamper research and development
- Companies are being forced into negotiations against their will, thereby violating the 1st Amendment
- Being forced to sell products at lowered rates constitutes unlawful government seizure, thereby violating the 5th Amendment
- The fines Medicare can implement for noncompliance are excessive, thereby violating the 8th Amendment
“Giving a single government agency the power to arbitrarily set the price of medicines with little accountability, oversight, or input from patients and their doctors will have significant negative consequences long after this administration is gone,” argues lobbying group Pharmaceutical Research and Manufacturers of America (PhRMA).
“Many of the medicines selected for price setting already have significant rebates and discounts,” says PhRMA CEO Stephen J. Ubl, adding that the list of medications being negotiated resulted from a “rushed process focused on short-term political gain rather than what is best for patients.”
As some have pointed out, pharmacy benefit managers may attempt to evade lowered prices by moving drugs into a different tier or creating new requirements for prescription coverage. Based on the level of opposition we’re seeing from pharmaceutical companies, I wouldn’t be surprised if this issue lands in the Supreme Court.
Author’s Note: The government should be able to secure lower prices through these negotiations, but whether these prices last is a different question. This is a socialist solution and socialism always backfires! Already, analysts are warning of the possibility that companies will respond to lowered prices by delaying product launches, restricting access to certain drugs, and even manipulating research.