What will Trump do on Medicare drug price negotiations?
In a parting shot at the incoming Trump administration, outgoing President Biden’s administration issued the next list of 15 drugs subject to negotiations in Medicare prior to Biden’s White House exit. The list was due by February 1, so the early release is a challenge to the Trump administration not to repeal the negotiation law included in the Inflation Reduction Act (IRA). The prices on the 15 drugs would go into effect on January 1, 2027 after a process in 2025. In 2024, prices for the first 10 drugs were set and take effect on January 1, 2026.
The Centers for Medicare and Medicaid Services (CMS) says that between November 2023 and October 2024 about 5.3 million people with Medicare Part D coverage used these drugs to treat a variety of conditions, such as cancer, type 2 diabetes, and asthma. The drugs accounted for about $41 billion in total gross covered prescription drug costs under Medicare Part D, or about 14%. If you combine these drugs with the 10 drugs with prices set in the first round, over a third of total gross covered prescription drug costs under Medicare Part D will already have been subject to negotiation. Part B medical drugs will be added to the program for price negotiations for 2028.
In a related note, in its draft Medicare Advantage (MA) and Part D 2026 proposed rule, the administration also proposed to make GLP-1 drugs available for weight loss alone in Medicare if beneficiaries have obesity. Currently, someone only has access if they have underlying disease states such as diabetes or cardiovascular disease and are overweight or obese. The rule was not finalized before Biden left office. Trump will have to decide whether he keeps the provision, which is extremely costly and could further destabilize the standalone Part D program (but also hurt Medicare Advantage). Interestingly, GLP-1 drugs, which cost $1,000 or more on a list-price basis. Are among the 15 drugs on the 2027 list from Biden.
Trump will need to decide as well what he does with Medicare drug price negotiations. He could change the drugs proposed for round two. He could slow the process and water it down. Some say he could ignore the law.
Drugs in round 2
The drugs for round two are:
- Ozempic; Rybelsus; Wegovy (for weight loss as well as diabetes, cardiovascular, and other diseases)
- Trelegy Ellipta (for COPD and asthma)
- Xtandi (for prostate cancer)
- Pomalyst (for myeloma)
- Ibrance (for breast cancer)
- Ofev (for certain lung diseases)
- Linzess (for irritable bowel syndrome)
- Calquence (for certain blood cancers)
- Austedo; Austedo XR (for the treatment of chorea associated with Huntington’s disease)
- Breo Ellipta (for COPD and asthma)
- Tradjenta (for type 2 diabetes)
- Xifaxan (for irritable bowel syndrome and other diseases)
- Vraylar (for schizophrenia, bipolar disease, and other mental health illnesses)
- Janumet; Janumet XR (for type 2 diabetes)
- Otezla (for plaque psoriasis and psoriatic arthritis)
Record so far
Now, I am the first to admit that the negotiation process needs to mature and bear much more fruit. The 2024 drug negotiations dropped the initial 10 drugs’ prices by 22% on average on a net price (post rebate) basis. So, the record is mixed: the prices that will go into effect in 2026 would appear to be below some other smaller government programs that negotiate prices but still be well above prices in other developed countries. American prices still will be manyfold above other developed nations and that fact is not fundamentally changed based on the first round of negotiations. See the graphic below and my in-depth blog on this subject here: https://www.healthcarelabyrinth.com/the-two-sides-of-drug-prices-after-negotiations/
It is easy to Monday-morning quarterback complex negotiations. The program is novel for America and Biden had to take a go-slow approach initially, especially given legal and political issues.
Where will Trump go?
During his first term, Trump 45 actually proposed to have Medicare medical drugs to be set according to the most favorable price in other developed nations. This is called most favored nation (MFN) pricing and is related to international reference pricing (IRP) or benchmarking. On taking office in 2021, the Biden administration actually pulled the proposal back because of the operational framework. It required providers to negotiate prices before the international benchmark took effect. At the time, Trump said he wanted to do the same type of thing with Part D retail drugs in Medicare.
Since leaving office, Trump has been inconsistent in his views on drug price negotiations. He is seen as more friendly to brand drug makers and Big Pharma. He backed off his prior proposals on international reference pricing only to say that maybe he will do it anyway.
Yesterday, Trump’s new CMS issued a statement in support of continuing negotiations but soliciting input and bringing more transparency. This is a blow to Big Pharma, which had hoped to convince Trump to stall or abandon Round 2.
I would argue that Trump has a great opportunity to take credit for and fully mature the Medicare drug price negotiation system. While most GOP lawmakers are fully in the hip pocket of Big Pharma, Trump is not. I think the populist in Trump, who thinks about the plight of average Americans, will continue to win over the pressure of pinstriped Big Pharma lobbyists who will continue to push to repeal the law. Indeed, it ties well to his view that foreign governments and businesses are taking advantage of the American public. The one dynamic is whether Big Pharma-friendly GOP lawmakers will insist on changes or repeal as a condition of their support for budget reconciliation. The CMS statement is a good sign that the program may not face an ax in budget reconciliation.
The Medicare drug process can and should mature over time. A populist Trump could:
- Ensure better and better review of comparative clinical- and cost-effectiveness. This is what is done in other developed countries.
- Amend the law to include his ideas for MFN and IRP within the current negotiations.
- While the commercial world will benefit informally over time when drug prices are set in Medicare, he could explicitly amend the law to have it cover employer and other commercial products.
- Have master price negotiations across all lines of business.
- Use his tariff proposals to negotiate drug prices with foreign firms. Foreign firms would agree to reduced drug prices or face tariffs that would impact their market share and profits in the U.S. Between two-thirds and three-quarters of all Big Pharma profits come from U.S. consumers, principally Medicare enrollees.
#drugpricing #ira #branddrugmakers #trump
— Marc S. Ryan
