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Medicare Releases Negotiated Prices on 10 Expensive Drugs
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The Centers for Medicare & Medicaid Services (CMS) reached an agreement with leading drug manufacturers under the U.S. government’s drug price negotiation program — part of the Inflation Reduction Act of 2022 (IRA) — to lower the prices of 10 selected drugs. These revised prices will go into effect from Jan 1, 2026.
This program kicked off in August 2023 when the CMS released its first list of these 10 drugs that Medicare had selected for negotiating the lowering of prescription drug prices directly with drug manufacturers.
In 2022, Congress passed the IRA, which made significant changes to how drugs are covered and paid for under Medicare. Every year, Medicare spends billions of dollars on reimbursing medicines. Under the IRA, the U.S. government gave authority to Medicare to negotiate the price of some prescription medicines directly with drug manufacturers, hoping to save the government billions of dollars. Before the IRA was passed, Medicare was not allowed any such negotiations with drug manufacturers.
These negotiated prices offer price cuts ranging from 38% to 79% compared with the 2023 list prices of the drugs. CMS claims that the negotiated prices will not only help Medicare save around $6 billion in the first year but will also help American citizens save an additional $1.5 billion in out-of-pocket expenses on these drugs.
These 10 drugs are some of the some of the most expensive and most frequently dispensed drugs in the Medicare program. The negotiated drug list includes expensive medicines for cancer, diabetes, auto-immune conditions and blood thinners. These medicines, covered under Medicare Part D, are taken by millions of Americans and account for a huge portion of Medicare spending annually. Some names on the list are Bristol Myers (BMY - Free Report) /Pfizer’s blood thinner, Eliquis; diabetes drugs Farxiga, Fiasp, Januvia and Jardiance, which are marketed by AstraZeneca (AZN - Free Report) , Novo Nordisk, Merck (MRK - Free Report) and Boehringer Ingelheim, respectively; J&J (JNJ - Free Report) and Amgen’s (AMGN - Free Report) respective immunology medicines, Stelara and Enbrel; Novartis’ (NVS - Free Report) heart failure drug Entresto; and J&J/AbbVie’s cancer drug Imbruvica.
The major reductions in list prices were seen in diabetes drugs — a 79% discount off the list price for Merck’s Januvia, a 76% cut for Novo’s Fiasp and a 68% plunge for AstraZeneca’s Farxiga. Jardiance received a 66% cut. Novartis’ heart failure drug will be getting a 53% discount.
J&J’s Stelara and Amgen’s Enbrel received a price cut of 66% and 67%, respectively, while Bristol Myers-Pfizer partnered Eliquis will be available at a discount of 56%. The lowest price cut in the list was for J&J/AbbVie’s leukemia drug Imbruvica, which was set at 38%.
The federal government expects that the negotiated prices will likely result in Congress budget savings of nearly $100 billion over 10 years from drug negotiations.
All these actions by the U.S. government will affect the sales and profits of these big drugmakers. However, the stock prices of most of these large drugmakers were not affected much in trading on Thursday, likely since Wall Street had already factored in these changes when the list of drugs was announced last year. Also, the biosimilar/generic versions of some of these drugs, like J&J’s Stelara, are expected to be launched next year, which would, anyway, cause a decline in sales.
However, the completion of these negotiations has not gone so smoothly. Many of these drugmakers have filed lawsuits against the government, calling these negotiations ‘unconstitutional.’ Few of these lawsuits have even been dismissed. In response to the negotiated prices, Novartis issued a statement claiming that it only ‘acceded’ to the price negotiations, fearing ‘catastrophic fines or the removal of all our products from both Medicare and Medicaid.’
CMS plans to publicly issue an explanation of how it reached these negotiations by March 2025.
The 10 listed drugs are just the first in what will become an ongoing process as more drugs are selected each year. CMS is in the process of selecting up to 15 drugs for negotiation for 2027 and intends to complete the same by Feb 1, 2025. It plans to select up to another 15 drugs for 2028 and up to 20 more drugs for each year after that — a requirement that needs to be fulfilled for compliance with the IRA.
Under the U.S. government’s drug price negotiation program, the Medicare Part D program was redesigned to require drugmakers to bear more of the liability for certain drug benefits and government price-setting for certain Medicare Part D drugs (starting in 2026) and Medicare Part B drugs (starting in 2028). The program also included penalties for significant increases in the prices of drugs.
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Medicare Releases Negotiated Prices on 10 Expensive Drugs
The Centers for Medicare & Medicaid Services (CMS) reached an agreement with leading drug manufacturers under the U.S. government’s drug price negotiation program — part of the Inflation Reduction Act of 2022 (IRA) — to lower the prices of 10 selected drugs. These revised prices will go into effect from Jan 1, 2026.
This program kicked off in August 2023 when the CMS released its first list of these 10 drugs that Medicare had selected for negotiating the lowering of prescription drug prices directly with drug manufacturers.
In 2022, Congress passed the IRA, which made significant changes to how drugs are covered and paid for under Medicare. Every year, Medicare spends billions of dollars on reimbursing medicines. Under the IRA, the U.S. government gave authority to Medicare to negotiate the price of some prescription medicines directly with drug manufacturers, hoping to save the government billions of dollars. Before the IRA was passed, Medicare was not allowed any such negotiations with drug manufacturers.
These negotiated prices offer price cuts ranging from 38% to 79% compared with the 2023 list prices of the drugs. CMS claims that the negotiated prices will not only help Medicare save around $6 billion in the first year but will also help American citizens save an additional $1.5 billion in out-of-pocket expenses on these drugs.
These 10 drugs are some of the some of the most expensive and most frequently dispensed drugs in the Medicare program. The negotiated drug list includes expensive medicines for cancer, diabetes, auto-immune conditions and blood thinners. These medicines, covered under Medicare Part D, are taken by millions of Americans and account for a huge portion of Medicare spending annually. Some names on the list are Bristol Myers (BMY - Free Report) /Pfizer’s blood thinner, Eliquis; diabetes drugs Farxiga, Fiasp, Januvia and Jardiance, which are marketed by AstraZeneca (AZN - Free Report) , Novo Nordisk, Merck (MRK - Free Report) and Boehringer Ingelheim, respectively; J&J (JNJ - Free Report) and Amgen’s (AMGN - Free Report) respective immunology medicines, Stelara and Enbrel; Novartis’ (NVS - Free Report) heart failure drug Entresto; and J&J/AbbVie’s cancer drug Imbruvica.
The major reductions in list prices were seen in diabetes drugs — a 79% discount off the list price for Merck’s Januvia, a 76% cut for Novo’s Fiasp and a 68% plunge for AstraZeneca’s Farxiga. Jardiance received a 66% cut. Novartis’ heart failure drug will be getting a 53% discount.
J&J’s Stelara and Amgen’s Enbrel received a price cut of 66% and 67%, respectively, while Bristol Myers-Pfizer partnered Eliquis will be available at a discount of 56%. The lowest price cut in the list was for J&J/AbbVie’s leukemia drug Imbruvica, which was set at 38%.
The federal government expects that the negotiated prices will likely result in Congress budget savings of nearly $100 billion over 10 years from drug negotiations.
All these actions by the U.S. government will affect the sales and profits of these big drugmakers. However, the stock prices of most of these large drugmakers were not affected much in trading on Thursday, likely since Wall Street had already factored in these changes when the list of drugs was announced last year. Also, the biosimilar/generic versions of some of these drugs, like J&J’s Stelara, are expected to be launched next year, which would, anyway, cause a decline in sales.
However, the completion of these negotiations has not gone so smoothly. Many of these drugmakers have filed lawsuits against the government, calling these negotiations ‘unconstitutional.’ Few of these lawsuits have even been dismissed. In response to the negotiated prices, Novartis issued a statement claiming that it only ‘acceded’ to the price negotiations, fearing ‘catastrophic fines or the removal of all our products from both Medicare and Medicaid.’
CMS plans to publicly issue an explanation of how it reached these negotiations by March 2025.
The 10 listed drugs are just the first in what will become an ongoing process as more drugs are selected each year. CMS is in the process of selecting up to 15 drugs for negotiation for 2027 and intends to complete the same by Feb 1, 2025. It plans to select up to another 15 drugs for 2028 and up to 20 more drugs for each year after that — a requirement that needs to be fulfilled for compliance with the IRA.
Under the U.S. government’s drug price negotiation program, the Medicare Part D program was redesigned to require drugmakers to bear more of the liability for certain drug benefits and government price-setting for certain Medicare Part D drugs (starting in 2026) and Medicare Part B drugs (starting in 2028). The program also included penalties for significant increases in the prices of drugs.