The companies have 30 days to accept or make a counteroffer. It’s not likely they will accept anything without a major fight, considering there are numerous lawsuits against the administration from manufacturers and the industry’s top lobbying group. 

The companies have argued that the negotiation process is unconstitutional and amounts to forced price fixing, which could lead to lower profits, less money invested in research and development and, consequently, fewer drugs on the market.  

Assuming the government prevails in the lawsuits, final prices will be announced on Sept. 1, though they won’t take effect until 2026. The Inflation Reduction Act, which mandated the negotiation process, established a minimum price discount of 25 percent for a drug that is 9 to 12 years old. Older drugs could face discounts of up to 60 percent.  

Manufacturers that don’t want to take part in negotiations can withdraw all of their products from coverage under Medicare and Medicaid, but they would lose a highly lucrative income source.

The Department of Health and Human Services (HHS) has said the negotiation process will consider the selected drug’s clinical benefit, the extent to which it fulfills an unmet medical need and its impact on people who rely on Medicare, among other considerations, such as costs associated with research and development as well as production and distribution. 

In 2022, about 9 million Medicare enrollees spent $3.4 billion out of pocket on the selected drugs from companies, including Johnson & Johnson, Merck, Bristol Myers Squibb and AstraZeneca, the White House said. 

The negotiation process is an opportunity for the administration to highlight President Biden’s efforts at lowering health costs. Even if the companies win in court, the White House is aiming for a political win, with Biden is positioning himself as someone willing to take on the pharmaceutical industry.

Biden is leaning into lowering health care costs and picking fights with the drug industry to show what he could bring to a second term and contrast with likely GOP nominee former President Trump.