Here at the Blog, we’ve been keeping an eye out for stories about the new laws giving Medicare – finally – the power to negotiate drug prices with major pharmaceutical companies. We ran an article in January 2023, based on this USA Today report, that explained how the first round of price cuts triggered by Medicare’s new clout would be announced about now.

Well, right on time, we have an official list – the first group of ten prescription drugs for which Uncle Sam and the drug makers have announced new reduced prices for Medicare Part D beneficiaries. According to this NBC News report, prepared by reporter Berkeley Lovelace, Jr., the new drug prices which take effect in 2026 will save beneficiaries roughly $1.5 billion annually in out-of-pocket costs.

While these drugs may not be household names for many of us, they represent a huge slice of Medicare spending – about $50 billion in annual Part D spending per year, which is about 20 percent of the total, according to CMS. Reports call these drugs the 10 costliest prescription drugs under Medicare.

Medicare Negotiates Price Break for These 10 Drugs

For the first time, NBC News explains, the federal government has successfully negotiated lower drug prices for Medicare beneficiaries. This comes at a time, says the article, when an estimated 1 in 7 older adults in the U.S. report that they struggle to pay for their medications.

Medicare’s new negotiating clout stems from a change in federal law under the Inflation Reduction Act passed in 2022. Prior laws barred Medicare from using its purchasing power to fight for lower drug costs. Now the landscape has changed dramatically.

As we said above, these 10 drugs may not bear familiar names, but they come with big price tags. Here are the negotiated prices for the drugs, based on a 30-day supply, as reported by NBC News:

• Eliquis, a blood thinner from Bristol Myers Squibb and Pfizer: $231 negotiated price, down from $521 list price.
• Xarelto, a blood thinner from Johnson & Johnson: $197 negotiated price, down from $517 list price.
• Januvia, a diabetes drug from Merck: $113 negotiated price, down from $527 list price.
• Jardiance, a diabetes drug from Boehringer Ingelheim and Eli Lilly: $197 negotiated price, down from $573 list price.
• Enbrel, a rheumatoid arthritis drug from Amgen: $2,355 negotiated price, down from $7,106 list price.
• Imbruvica, a drug for blood cancers from AbbVie and Johnson & Johnson: $9,319 negotiated price, down from $14,934 list price.
• Farxiga, a drug for diabetes, heart failure and chronic kidney disease from AstraZeneca: $178 negotiated price, down from $556 list price.
• Entresto, a heart failure drug from Novartis: $295 negotiated price, down from $628 list price.
• Stelara, a drug for psoriasis and Crohn’s disease from J&J: $4,695 negotiated price, down from $13,836 list price.
• Fiasp and NovoLog, diabetes drugs from Novo Nordisk: $119 negotiated price, down from $495 list price.

(The new negotiated prices shown are compared to the 2023 list prices of the drugs.)

Your Actual Drug Cost May Vary, Experts Say

Reporter Lovelace notes that cost comparisons for prescription drugs can be complicated and misleading. One health policy expert, Stacie Desetzina of Vanderbilt University, told Lovelace that these numbers do not represent a direct comparison between the new negotiated prices and what Medicare and enrollees would have originally paid. “The list price is the full retail price of a medication and doesn’t include any discounts or rebates a drug company may have offered,” Lovelace explains.

Nevertheless, Dusetzina calls the new prices “pretty big discounts.” She adds, “I think that it shows that they’re taking these negotiations very seriously and they’re trying to get much lower prices.” 

The article implies that price negotiations, which lasted for the first half of 2024, became contentious. “The lower prices are the result of months of heated negotiations between the federal government and drugmakers over the pricey medications,” NBC News reports.

New Price Reductions Represent a Medicare Landmark

The significance of this announcement goes far beyond a specific list of drugs. As Lovelace writes, “The prices won’t take effect until 2026, but the measure is a landmark for Medicare.” The reason, he adds, is simple: “The federal government has never been able to directly haggle with drugmakers over the prices of their prescription drugs.”

White House adviser Neera Tanden, on a recent conference call with reporters, called this “a historic moment.” As Tanden stated, “Millions of seniors and others on Medicare will soon see their drug costs go down on some of the most common and expensive drugs that treat heart disease, cancer, diabetes, blood costs and more.”

More than 65 million people in the U.S. rely on Medicare. The Biden administration projects total savings for enrollees of $1.5 billion in out-of-pocket costs in the first year from these 10 drugs alone.

Months of “Intense” Negotiation Produce a Settlement

Lovelace writes, “The negotiations — as mandated under the Inflation Reduction Act — began in earnest in January, when Medicare presented its opening prices to drugmakers.”  The $1.5 billion in savings represented by the final list is in addition to other provisions in the Inflation Reduction Act, including a $35 monthly cap on the out-of-pocket cost of insulin and an annual cap on out-of-pocket prescription drug costs, officials told NBC News.

Beneficiaries aren’t the only ones who will save, said government officials. Medicare itself should see cost reductions of as much as $6 billion in the first year.

NBC News quotes Health and Human Services Secretary Xavier Becerra who described the negotiations as “intense.” But Becerra credits both the government and the industry. “It took both sides to reach a good deal,” he said.

Drugmakers Had a Choice: Negotiate or Face a Tax Penalty

The new law basically put Big Pharma in a hammerlock, NBC News explains. “If a drugmaker refused to negotiate, they faced a tax penalty, which could be lifted if the drugmaker chose to withdraw their drug from the Medicare program,” says Lovelace.

All of the listed drugmakers were asked by NBC News for comment. None was happy with the outcome. One called the negotiations “unconstitutional” and claimed the new negotiating power of Medicare “will have long-lasting and devastating consequences for patients.” The leader of the drug industry’s trade group, Pharmaceutical Research and Manufacturers of America, asserted that the new law was passed purely for “political headlines” and doubted whether consumers would realize any actual savings in the long run.

Whether the motive was political or not, the roll-out of lower prices has seen a blitz of news coverage designed, says the article, “to bolster Vice President Kamala Harris’ campaign ahead of the presidential election against former President Donald Trump.” Harris and President Joe Biden made a joint appearance last week to promote the savings from the program.

U.S. Drug Prices Far Higher Than in Comparable Countries

Those who argue that America’s complex insurance structure is keeping drug prices high got some ammunition earlier this year. In January, “an analysis from the Commonwealth Fund, a nonprofit health care research institute, found that U.S. retail prices — prices pharmacists charge to patients or insurers before discounts or rebates — for the 10 selected drugs were three to eight times higher compared with prices in other countries of similar size and wealth,” NBC News reports.

As the Commonwealth Fund analysis put it, “For a basket of the 10 selected drugs in 2021, the price in the U.S. is three to eight times the price in every comparison country.” These 10 drugs cost Medicare recipients $3.4 billion in combined out-of-pocket costs in 2022.

Announced Price Reductions are Only the Beginning

The NBC News article explains that this is only Round One of Medicare drug price negotiations. “The 10 negotiated drugs are just the start,” Lovelace writes: “In 2027, negotiated prices will go into effect for 15 more drugs, followed by another 15 drugs in 2028 and 20 more in each subsequent year.”

This will hopefully trigger increased savings, unless the drug industry gets its way. As the article explains, “The outcome could be jeopardized if the drugmakers succeed in their lawsuits to block the law, which have so far been unsuccessful.”

Still, health policy expert Dusetzina says it’s “a big deal” that all 10 pharmaceutical manufacturers signed off on the deal. As she said in an email to NBC News, “No one opted to leave Medicare and Medicaid in protest over their negotiated prices. That’s a success!”

While the current negotiations are limited to drugs under Medicare Part D, covering prescription drugs used at home, the law will expand that scope in the future. “In the coming years,” Lovelace reports, “drugs under Medicare Part B, which are administered in medical facilities — such as chemotherapy drugs — will also be subject to negotiation.”

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(originally reported at www.nbcnews.com)