Activists protest the cost of prescription drugs in front of the US Department of Health and Human Services (HHS) building on October 6, 2022 in Washington, DC.
Anna Moneymaker | Getty Images
US patients and pharmacists will get a first look at how much Medicare can negotiate to lower drug prices in 2024, setting the precedent for a controversial process that could affect what seniors pay dozens of drugs until the end of the decade.
It could also be a pivotal year for lawsuits against pharmacists – including Merck, Johnson & Johnson and Bristol Myers Squibb – have testified against price talks. Decisions could be made in some of the cases next year, which could eventually escalate the issue to the Supreme Court.
President Joe Biden’s Inflation Reduction Act, which passed on a party-line vote last year, gave Medicare the authority to negotiate drug prices directly with manufacturers for the first time in the federal program’s nearly 60-year history.
Medicare is negotiating prices for the first round of 10 prescription drugs in an effort to make these costly treatments more affordable for older Americans. By fall, the federal government will publish the agreed prices for these drugs, which will take effect in 2026.
The outcome of the talks will have huge stakes for the pharmaceutical industry, which sees the process as a threat to revenue growth, profits and drug innovation.
The final prices will determine how much revenue the companies that make the drugs can expect to lose in a few years. The data will also give other drugmakers an idea of how much their sales could be affected if their drugs are selected for future rounds of negotiations.
But the final agreed prices are also important for patients, who will get a first look at how much money the talks will save them at a time when many older people are increasingly struggling to afford drugs.
“We’ll see how much this program can negotiate and give to patients who are already there [the drugs] an idea of the savings they’re going to see,” said Leigh Purvis, director of prescription drug policy at the AARP Public Policy Institute.
AARP is the influential lobby group representing people over 50. The organization has supported new Medicare bargaining powers.
A pharmacist holds a bottle of the drug Eliquis, made by Pfizer Pharmaceuticals, at a pharmacy in Provo, Utah, Jan. 9, 2020.
George Frey | Reuters
The negotiated drugs are among the top 50 highest costers for Medicare Part D, which covers prescription drugs filled by seniors at retail pharmacies.
In 2022, 9 million seniors spent 3.4 billion dollars out of pocket for the 10 drugs, and some were paying more than $6,000 a year for just one of the drugs on the list, according to the Biden administration.
Nearly 10 percent of Medicare enrollees age 65 and older, and 20 percent of those younger than 65, report drug supply challenges, the administration said in August.
Medicare covers about 66 million people in the U.S., and 50.5 million patients are currently enrolled in Part D plans, according to the health policy research organization KFF.
What does the timetable for the negotiations look like?
The Biden administration formally began the negotiation process in August, when it began called the first round of drugs subject to price discussions. They include diabetes drugs from Merck and AstraZeneca and blood thinners from Bristol Myers Squibb and Johnson & Johnson.
Two months later, all the companies that make the drugs on the list have signed agreements to join the negotiations, even after most of them sued the Biden administration to stop the talks.
But the actual trading period will begin on February 1, when the Centers for Medicare & Medicaid Services will make the initial “maximum fair price” offers for each of the 10 selected drugs. CMS is required to include a justification of why the price is fair based on various factors.
This includes U.S. sales volume data, a manufacturer’s research and development costs, federal financial support for the drug’s development, data on pending or approved patent applications and exclusivity, or a period of time during which a brand-name drug is protected from generic competition.
The first 10 drugs are subject to price negotiations
- Eliquis, made by Bristol Myers Squibb, is used to prevent blood clotting, to reduce the risk of stroke.
- Jardiance, made by Boehringer Ingelheim, is used to lower blood sugar for people with type 2 diabetes.
- Xarelto, made by Johnson & Johnson, is used to prevent blood clotting, to reduce the risk of stroke.
- Januvia, made by Merck, is used to lower blood sugar for people with type 2 diabetes.
- Farxiga, made by AstraZeneca, is used to treat type 2 diabetes.
- Entresto, made by Novartis, is used to treat certain types of heart failure.
- Enbrel, made by Amgen, is used to treat rheumatoid arthritis.
- Imbruvica, made by AbbVie, is used to treat different types of blood cancer.
- Stelara, made by Janssen, is used to treat Crohn’s disease.
- Fiasp and NovoLog, insulins manufactured by Novo Nordisk.
After receiving the offers, the companies have one month to accept it or face it. Negotiations end when CMS and pharmacists reach an agreement.
If CMS rejects the counteroffer for a drug, the agency can arrange up to three meetings with the pharmacist to discuss other price options.
CMS must make final price offers to manufacturers by July 15, and those companies have two weeks to accept or reject them. If pharmacists fail to agree on a price with Medicare by Aug. 1, they could be forced to pay an excise tax of up to 95 percent of a drug’s U.S. sales or withdraw all of their drug products from the Medicare and Medicaid markets.
CMS will publish the agreed rates on September 1.
After the initial round of talks, CMS can negotiate prices for another 15 drugs that will go into effect in 2027 and another 15 that will go into effect in 2028. The number increases to 20 drugs under negotiation annually starting in 2029.
CMS will only select Medicare Part D drugs for the drugs covered in the first two years of negotiations. It will add more specialty drugs covered by Medicare Part B, which are usually prescribed by doctors, in 2028.
How drug lawsuits could evolve
The legal battle between drugmakers and the Biden administration could also see critical developments in 2024, as cases may begin moving to the appeals courts.
Merck, Johnson & Johnson, Bristol Myers Squibb, AstraZeneca, Novo Nordisk, Novartis and Boehringer Ingelheim are suing to stop the negotiation process. Each of the companies has a drug selected for negotiations.
The industry’s largest lobbying group, PhRMA, and the nation’s largest business lobbying organization, the US Chamber of Commerce, have filed their own lawsuits. A federal judge in September denied a preliminary injunction sought by the Chamber of Commerce aimed at blocking price talks.
All of the drugmakers and the two trade groups have sought summary judgment in their cases against the Biden administration, arguing that the price talks are unconstitutional and should be struck down.
Decisions in most of those cases could be made within the next six months, according to Kelly Bagby, vice president of litigation at the AARP Foundation.
He said that whatever the rulings are, they will likely be appealed to federal appeals courts in the US. added.
“The Supreme Court would feel compelled to take the case and evaluate the constitutionality of the deflation law itself,” Bagby said, noting the issue may not reach the nation’s highest court until 2025.
Some drugmakers, such as Merck, have already confirmed they want to take their legal battle to the Supreme Court.
Pharmacists in the lawsuits argue that the negotiations would force them to sell their drugs at huge discounts, below market prices. They claim this violates the Fifth Amendment, which requires the government to pay reasonable compensation for private property taken for public use.