Biden Administration Announces First 10 Negotiated Medicare Drug Prices
In a coup for the Biden administration, all manufacturers of the ten drugs subject to negotiation for 2026 either agreed to prices or decided to stay in the Medicare prorgam when a price was imposed. The administration and the Centers for Medicare and Medicaid Services (CMS) say that, if the new prices had been in effect last year, Medicare would have saved an estimated $6 billion, or approximately 22 percent, across the ten selected drugs. The negotiated prices range from 38 to 79 percent discounts from list prices.
About nine million people with Medicare use at least one of the ten drugs. In addition to government savings, Medicare beneficiaries with prescription drug coverage will see savings of $1.5 billion in their personal out-of-pocket costs in 2026.
The drugs accounted for $56.2 billion in Medicare spending, or about 20 percent of total Part D gross spending in 2023.
The Congressional Budget Office (CBO) estimated $100 billion in savings over 10 years from drug negotiations, and a $3.7 billion savings in the first year. So the first-year negotiations could save more.
The journey for Medicare drug price negotiations (passed as part of the Inflation Reduction Act) continues with CMS selecting up to fifteen more drugs covered under Part D for negotiation for 2027 by February 1, 2025. This will continue with up to fifteen more drugs covered by Part B or Part D for 2028, and up to 20 more Part B or Part D drugs for each year after that.
The real issue is while savings from the list prices are between 38 and 79 percent, what will the net savings be? Because prices are now set, brand drug makers will no longer give rebates to the pharmacy benefits managers (PBMs) at the level they did before if at all. But based on estimates of rebates, the final pricing is still a substantial savings. Before the announcement, analysts at JPMorgan suggested the negotiated prices could be on average 40% lower, which is greater than the 22 percent announced by CMS. Still, PBMs often keep portions of rebates, consumers don’t see the rebate relief at the point of sales, and this provides for a much more transparent model more along the lines of generic drugs.
Other concerns revolve around whether pharmacy benefits managers could restrict access to the drugs in favor of others with rebates. CMS says it will use a comprehensive formulary review process to prevent this abuse that would undermine patient access.
CMS announcement materials: https://www.cms.gov/newsroom/press-releases/negotiating-lower-drug-prices-works-saves-billions and https://www.cms.gov/newsroom/fact-sheets/medicare-drug-price-negotiation-program-negotiated-prices-initial-price-applicability-year-2026 and https://www.cms.gov/files/document/fact-sheet-negotiated-prices-initial-price-applicability-year-2026.pdf
Additional articles: https://www.modernhealthcare.com/politics-policy/biden-medicare-drug-price-negotiations-pharmaceutical-costs-abbvie-merck-amgen and https://www.healthcaredive.com/news/medicare-drug-price-negotiations-results/724320/ and https://www.beckershospitalreview.com/pharmacy/cms-negotiated-drug-prices-12-notes.html and https://thehill.com/homenews/4829155-medicare-drug-price-negotiations/ and https://thehill.com/policy/healthcare/4828633-medicare-negotiations-6-billion-savings/ and https://www.managedhealthcareexecutive.com/view/questions-remain-about-whether-negotiated-drug-prices-will-save-money and https://www.managedhealthcareexecutive.com/view/hhs-releases-prices-for-medicare-negotiated-drugs and https://insidehealthpolicy.com/daily-news/cms-drug-negotiations-beat-cbo-expectations-price-cuts-38-79-percent
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