Medicare to Negotiate Prices for 10 High-Cost Drugs Under New Democratic Reform Law

August 29, 2023

Medicare will negotiate prices for ten high-cost drugs, including major diabetes medications and blood thinners, as part of a drug pricing reform law by Democrats. Here’s what you need to know:

  • The new prices will be announced in September 2024 and will take effect from January 2026.
  • The selected drugs cost Medicare over $50 billion, constituting 20% of its pharmacy drug costs over a year.
  • Some of the largest pharmaceutical companies that produce these drugs are involved. Stock market reactions have so far been minimal, but this may change as more details are released.
  • Despite its popularity with voters, the legislation was opposed by all Republicans.
  • Several pharmaceutical companies have sued the Biden administration, claiming the program is unconstitutional.
  • Starting with ten drugs, the agency plans to negotiate an additional 15 Part D drugs in 2027, another 15 Part D and Part B drugs for 2028, and another 20 Part D and Part B drugs for 2029, and so forth.
  • The minimum discounts Medicare will negotiate range from 25% to 60% off the list price, depending on how long the drug has been on the market.
  • Whether the negotiated prices will be lower than current prices under Medicare prescription drug insurance plans remains unknown.
  • Analysts don’t anticipate that pharmaceutical companies’ bottom lines will be significantly impacted, as they expected some selected drugs to lose exclusivity within two years.
  • A senior administration official said Medicare used more recent data for selection and other expected drugs could be picked in the future.
  • The Drug Price Inflation Reduction Act imposed penalties for drugmakers that raise prices faster than inflation and redesigned Medicare’s payment for Part D medications. It also caps out-of-pocket drug costs for seniors.
  • A top executive at Bristol Myers Squibb expressed concerns about the negotiation program’s fairness and potential impact on the future R&D decisions of the drug industry.
  • The law does not require that government savings from the negotiations be passed on to patients.
  • If generic or biosimilar competitors to these negotiated drugs appear on the market soon, it could affect how the negotiation process transpires.

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[Source: STAT, August 29th, 2023]

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