Medicare Begins Price Negotiations Under Inflation Reduction Act, Pharma Companies Stay Silent

February 1, 2024

The Centers for Medicare & Medicaid Services (CMS) has initiated Medicare price negotiations for the first ten drugs as mandated by the Inflation Reduction Act, setting the stage for price adjustments that will be effective in 2026. However, pharmaceutical companies involved are maintaining silence on the details of CMS’s initial pricing proposals, adhering to the confidentiality of the negotiation process. The industry’s reaction has been cautious, with companies emphasizing their commitment to dialogue with CMS but expressing concerns over the potential impact of government price-setting on innovation. Despite the industry’s apprehension and criticisms over the negotiation’s secrecy, recent research suggests the effect on R&D investment might be minimal. The negotiation process allows for a month of deliberation for acceptance or counteroffer under the threat of penalties or exclusion from Medicare and Medicaid coverage. The Biden administration highlights this initiative as a critical effort to reduce healthcare costs, with significant out-of-pocket savings anticipated for Medicare beneficiaries. CMS plans to disclose the rationale for the negotiated prices by March 2025, ahead of the 2026 implementation.

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[Source: Endpoints, February 2nd, 2024]

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