The negotiated prices for 30-day supplies of the 10 drugs are hundreds – and in some cases thousands – of dollars below list prices. If the prices had been in place last year, Medicare would have saved $6 billion on the 10 drugs, a savings of about 22 percent, according to the Centers for Medicare & Medicaid Services.
What gave Medicare the authority to negotiate drug prices down?
For decades, Medicare, by far the largest health insurer in the United States, was prohibited from negotiating directly with pharmaceutical companies over the prices of their drugs, even though private insurers routinely do so. That’s a big reason why drug prices in the United States are so much higher than in other developed countries where the government regulates prices.
Seniors and its advocates had long pressured Congress to allow Medicare to negotiate drug prices, arguing that the federal government’s purchasing power would lead to savings. The Inflation Control Act signed by President Joe Biden, which took effect in 2022, authorized Medicare for the first time to negotiate prices on certain drugs – 10 expensive but popular drugs that the insurer covers for 66 million people.
Pharmaceutical companies had sued the government in an attempt to derail the negotiations, but were unsuccessful. The drug companies argued that the new rebates would not necessarily reduce patients’ out-of-pocket costs and could hinder innovation in drug development.
None of the 10 drugs affected so far are made by Massachusetts-based companies, although several of the drugmakers have large operations in the state. The head of the trade group for the state’s robust life sciences industry on Thursday criticized the Biden administration’s initiative, warning it could dampen drug development research that is thriving here.
“The prices released today are the result of a flawed law that discourages the development of new cures, therapies and vaccines,” said Kendalle Burlin O’Connell, executive director of the Massachusetts Biotechnology Council. “MassBio remains concerned about the law and is committed to working with policymakers to develop alternative solutions that make it easier for patients to access innovative new therapies.”
What is the response to the negotiated prices?
Supporters say this is long overdue.
Jen Benson, state director of the Massachusetts chapter of the American Association of Retired Persons, said more than 1.4 million people in the state are covered by Medicare and pay on average for four to five prescription drugs each month.
“So this can be a very big savings for our aging population in Massachusetts, meaning they’re more likely to be able to adhere to the treatment plans prescribed by their doctors,” Benson said. AARP, she added, has been pushing for drug price caps “for many, many years.”
The pharmaceutical industry said that high drug prices are not the fault of manufacturers, but of insurance companies and pharmacy benefit managers (PBMs), which act as intermediaries between pharmaceutical companies and consumers.
“The government is using the IRA’s pricing system to make political headlines, but patients will be disappointed when they learn what it means for them,” said Steve Ubl, president and CEO of Pharmaceutical Research and Manufacturers of America (PhRMA). “There is no guarantee that patients will pay less out of pocket because the law has done nothing to curb abuse by insurance companies and PBMs, which ultimately decide which drugs are covered and what patients pay at the pharmacy.”
PhRMA stressed that the pricing initiative is anything but a negotiation. If a company does not agree to a price cap, the trade group said, it will face severe penalties, including the loss of Medicare and Medicaid coverage for all of its drugs.
Does Medicare plan to negotiate prices for additional drugs?
That’s true. So far, negotiations have been limited to drugs covered by Medicare Part D that are taken at home. In the coming years, Medicare Part B drugs that are administered in medical facilities – such as chemotherapy infusions – will also be negotiated.
According to the White House, Medicare will select up to 15 additional drugs covered by Part D for negotiation in 2025, up to 15 more drugs covered by Parts B and D in 2026, and up to 20 drugs each year thereafter.
Jonathan Saltzman can be reached at [email protected].
