The Biden Administration announced significant savings from recent Medicare drug price negotiations. The Centers for Medicare and Medicaid Services (CMS) estimates $3.7 billion in savings during the first year when the new prices are implemented and approximately $6 billion over 2026. This initiative marks the first use of the Medicare price negotiation program, introduced under the Inflation Reduction Act (IRA) enacted in August 2022.
The negotiated prices target ten select drugs, with price reductions ranging from 38% to 79% compared to list prices. Notably, MSD’s Januvia (sitagliptin) experienced the most substantial cut at 79%, followed by a 76% reduction for certain branded insulin products. These drugs were already subject to rebates and discounts by Medicare Part D plan providers, but exact net prices remain undisclosed by CMS.
Effective from January 1, 2026, these savings could have significant impacts. The Congressional Budget Office forecasts that over ten years, the IRA’s negotiation process alone will save taxpayers around $100 billion. In 2023, the ten targeted drugs represented $56.2 billion in Medicare expenditures, or roughly 20% of Medicare Part D’s total costs, with out-of-pocket costs for patients totaling $3.9 billion.
Medicare drug price drops announced
If the negotiated prices had been in effect in 2023, Medicare patients would have seen about $1.5 billion in out-of-pocket savings. The pharma industry has met the IRA with staunch opposition, deeming the negotiation process akin to price setting and unconstitutional.
Numerous companies initiated lawsuits against the US Government and the IRA, but federal judges dismissed nearly all cases, affirming that participation in Medicare’s negotiation program is voluntary. These dismissals represent setbacks for the pharmaceutical industry, which has been appealing the decisions. Despite contention, some acceptance has appeared.
For instance, BMS reported confidence in managing the impact of the IRA on Eliquis pricing and other companies similarly adjusted their financial projections to incorporate the negotiations’ outcomes. This development is a significant victory for the Biden Administration and Democrats, who aim to reduce prescription drug costs. The program will expand next year to include another 15 drugs, with prices taking effect in 2027.
The trajectory of the IRA and broader drug price control initiatives may hinge on the results of the 2024 US presidential elections. The recent Medicare drug price negotiations represent a substantial shift in US healthcare policy, with predicted savings and ongoing legislative battles signaling a turbulent but potentially transformative period for pharmaceutical pricing in the country.
- AARP.”New Medicare Part D Out-Of-Pocket Spending Cap is an Important Improvement for Enrollees Facing High Prescription Drug Costs”.
- BDemo.”Letters to the Editor”.
- PharmaceuticalTechnology.”US negotiations for first round of drugs reveal $6bn in Medicare savings”.