It’s beyond even my imagination that Medicare’s ability to negotiate just 10 drug prices as a result of the Inflation Reduction Act is a big deal. There are more than 19,000 prescription drugs, and the IRA still leaves people with Medicare paying far more than people in other wealthy countries for these drugs–if they can afford to. But, in this crazy country, the pharmaceutical industry is so powerful, the Biden administration and its allies are celebrating this accomplishment and concerned that Pharma’s legal challenges could upend it.
The Inflation Reduction Act gave Medicare the right to negotiate the prices of 10 brand-name drugs that have been on the market for some time and do not have generic competition, beginning in 2026. The goal is to save both Medicare and Medicare patients money. Unlike every other country, the US effectively confers monopoly pricing power to pharmaceutical corporations for their patented prescription drugs and, consequently, we pay higher prices for medications than every other wealthy country.
Over the next four years, Medicare will have the right to negotiate prices for up to 60 prescription drugs, if the pharmaceutical industry does not prevail in its lawsuits to prevent the government from negotiating drug prices. After that, Medicare will be able to negotiate the price of up to 20 drugs each year. President Biden hopes that older adults will support his and other Democrats’ candidacies in 2024, as a result of, and to ensure the lasting benefits of, this achievement.
In particular, millions of people with Medicare should see significant savings on several drugs that treat diabetes. In addition, beginning this year, diabetics with Medicare pay no more than $35 a month for each insulin drug they use. And, important vaccines, like RSV, are free. But, if voters don’t re-elect Democrats, it’s more than likely that a Republican Congress and President will try to undo these savings they refused to support.
The $99 billion in projected savings from drug price negotiation over 10 years is going towards an annual out-of-pocket limit of $2,000 for prescription drugs under Medicare Part D.
How will the drug price negotiations work? Pharmaceutical companies will need to agree to negotiate the prices for their drugs on the government’s list of 10. If they agree, the pharmaceutical companies must share data with the government to be used in negotiating the price. If they do not agree to drug price negotiation, they will pay a large penalty tax that can be as high as 95 percent of their sales of that drug, or they could withdraw the drug from the Medicare and Medicaid markets.
In February 2024, the government will propose a price for each drug. The pharmaceutical companies can propose an alternative. Negotiations will ensue. The government will announce final prices in September 2024, but the negotiated prices will not take effect until January 2026.
In February 2025, the government will announce the next 15 drugs to have their prices negotiated.
The drugs subject to price negotiation fall into two buckets, explains Dylan Scott for Vox:
1) Seven expensive drugs for diabetes, heart disease and other chronic conditions that millions of people use:
- Eliquis, for blood clots ($561 list price for one month’s worth of treatment that cost Medicare around $16.5 billion over the year ending May 2023)
- Entresto, for heart failure ($545 list price)
- Farxiga, for diabetes, heart disease, and chronic kidney disease ($549 list price)
- Januvia, for diabetes ($586 list price)
- Jardiance, for diabetes and heart failure ($570 list price)
- Xarelto, for blood clots and heart disease ($542 list price)
- Insulin injectors and the products used to refill them: Fiasp, Fiasp FlexTouch, Fiasp PenFill, NovoLog, NovoLog FlexPen and NovoLog PenFill
2) Three extremely expensive drugs that tens of thousands of people with severe and sometimes life-threatening conditions use and that cost Medicare about $2.6 billion each over the year ending May 2022:
- Enbrel, for rheumatoid arthritis, psoriasis, and psoriatic arthritis ($1,762 list price for one week’s dosage)
- Imbruvica, for blood cancers ($13,546 list price for one month’s worth of tablets)
- Stelara, for psoriasis, psoriatic arthritis, Crohn’s disease, and inflammatory bowel disease ($25,497 list price for eight weeks of use)
Here’s more from Just Care:
- This Fall, talk to your doctor about getting an RSV vaccine
- Biden administration penalizes drug companies hiking drug prices above the rate of inflation
- 2023: Medicare Part D prescription drug coverage and costs
- Merck sues Medicare over negotiated drug prices
- The deadly consequences of out-of-pocket drug costs
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