In a historic move aimed at lowering drug costs for millions of Americans, the federal government Tuesday announced the first 10 drugs that will be subject to price negotiations between Medicare and pharmaceutical companies.
As a key provision of the Inflation Reduction Act enacted last year, the government will begin negotiating a fair market price for the widely used drugs, which include Bristol-Myers Squibb’s Eliquis, Johnson & Johnson’s Xarelto and Eli Lilly/Boehringer Ingelheim’s Jardiance, among others.
Makers of the drugs have 30 days to agree to participate or face steep excise taxes or choose to withdraw their products from coverage by Medicare. The IRA mandates that up to a certain number of drugs will be added annually to the negotiations.
The pharmaceutical industry, which fought the IRA, has sued and there are seven other pending lawsuits from drug companies and trade groups that many experts expect to land in the Supreme Court. However, in briefings the Department of Justice is arguing that government drug price negotiations do not violate the Constitution. And the Congressional Budget Office estimates that Medicare negotiations will save the government nearly $100 billion over 10 years.
“Because of the [Inflation Reduction Act], Medicare finally has the power to negotiate lower drug prices for American seniors — something leaders have tried for decades to do but failed, until President Biden and Congressional Democrats finally got it done,” according to a White House official who refused to be identified.
Absent a court ruling that postpones negotiations, the talks will begin Oct. 1 and finish Aug. 1, 2024. Companies whose drugs are on the list must let the Centers for Medicare and Medicaid Services know within 30 days whether they will participate in the process. If a drugmaker declines, it could face an excise tax of between 65 percent and 95 percent.
“If allowed to stand, this law will dramatically slow innovation, reduce the availability of new medicines, and undermine public health, causing grave harm to patients, pharmaceutical manufacturers, and healthcare providers,” PhRMA said in its Aug. 10 motion for summary judgment.
CMS plans to publish the final negotiated prices by Sept. 1 of next year, and they will go into effect at the start of 2026.
The number of drugs subject to price negotiations will likely increase every year. The law allows CMS to negotiate the price of an additional 15 Medicare Part D drugs for 2027. For 2028, CMS can select another 15 Part D or Medicare Part B drugs, which covers drugs administered in a doctor’s office, such as chemotherapy.
Starting in 2029 and each subsequent year, CMS can add another 20 Part D or Part B drugs to the drug price negotiation program.