Medicare talks to yield $6B in savings

The first round of Medicare drug price negotiations will save an estimated $6 billion, according to the Biden administration.

Democrats touted the results with much fanfare Thursday, as they seek to campaign on lowering health costs. The savings from Medicare negotiations represents what they said is a long-sought victory over the pharmaceutical industry.

“Because Medicare is now able to negotiate lower prescription drug prices for seniors, American taxpayers are expected to save $6 billion on these 10 drugs alone when the negotiated prices go into effect,” White House domestic policy adviser Neera Tanden told reporters.

The negotiations were made possible by the Inflation Reduction Act, which has been one of President Biden’s biggest legislative accomplishments. But he has struggled to make the public aware of its benefits.

Medicare drug negotiation is an easy-to-understand and broadly popular idea, but a poll from nonpartisan health research group KFF in May showed only 48 percent of seniors were aware Biden was doing it.

Thursday’s announcement was made two weeks before the legal deadline and days ahead of the start of the Democratic National Convention, an indication that the Biden administration — including Vice President Harris, the Democratic presidential nominee — is eager to campaign on the savings.

The new negotiated rates represent a savings from 38 percent to 79 percent over the 2023 list prices of the drugs, which were some of the priciest in Medicare. Officials said the prices dropped more than 50 percent on nine of the 10 drugs based on the 2023 list price.

“The negotiations were comprehensive. They were intense. It took both sides to reach a good deal,” Health and Human Services Secretary Xavier Becerra said.

But it’s difficult to tell just how much seniors are actually saving on a drug-by-drug basis, as the administration said it couldn’t disclose the net price — the amount paid after rebates. For individual patients, the amount they save will largely depend on their insurance plan and their drug costs.

A separate provision of the Inflation Reduction Act caps out-of-pocket spending at $2,000 per year starting in 2026, which could also save money for people who take expensive drugs.

The negotiated prices also won’t take effect until 2026, but senior White House officials said they don’t expect the savings that year to be “materially different” from the estimates released Thursday.

“We estimate that Medicare enrollees will save $1.5 billion when the new prices go into effect in 2026,” said Chiquita Brooks-LaSure, administrator of the Centers for Medicare and Medicaid Services. “For so many people, being able to afford these drugs will mean the difference between debilitating illness and living full lives.”

The drugs were chosen for being among the highest total Part D gross covered prescription drug costs. They accounted for $3.4 billion in out-of-pocket costs for an estimated 9 million Medicare enrollees in 2022, according to the Biden administration. The medications that were chosen treat conditions including heart failure, diabetes, rheumatoid arthritis and blood cancers.

The Congressional Budget Office predicted a $100 billion savings over 10 years from the initiative, with at least $3.7 billion in savings in the first year alone.

Brooks-LaSure proclaimed the government had “achieved all of our goals” in the negotiating process.

“These negotiated prices are not just about costs. They are about helping to make sure that your aunt, your father, your grandfather or you can live longer and healthier. Today is a momentous day,” she said.

The initiative is set to be scaled up, as Medicare will negotiate 15 drugs in 2025 and 2026, and 20 drugs in subsequent years. The negotiated prices will be in effect until the drugs are no longer eligible for the program.

Negotiations were marked by a slew of lawsuits filed by the pharmaceutical industry seeking to halt the process and have it declared unconstitutional. So far, no drug companies or allied trade groups have come away victorious. Several of those lawsuits have been dismissed, or federal judges ruled in favor of the government.

But the Pharmaceutical Research and Manufacturers of America (PhRMA) trade group filed an appeal of its lawsuit in the 5th U.S. Circuit Court of Appeals, considered to be one of the most conservative in the country, with a history of ruling against the Biden administration.

Drug companies on Thursday were quick to attack the administration’s “maximum fair price” (MFP) as unfair government price-setting.

“The imposed ELIQUIS MFP does not reflect the substantial clinical and economic value of this essential medicine, which is widely recognized for its effectiveness in reducing stroke-related events, hospitalizations, and extended rehabilitation needs,” Bristol Myers Squibb, the manufacturer of Eliquis, a blood thinner, said in a statement.

Stephen Ubl, president and CEO of PhRMA, said the new prices don’t take into account the other players in the drug pricing marketplace, and won’t stop insurers and pharmacy benefit managers from their own efforts to keep prices, and profits, high.

“The administration is using the IRA’s price-setting scheme to drive political headlines, but patients will be disappointed when they find out what it means for them,” Ubl said in a statement. “There are no assurances patients will see lower out-of-pocket costs because the law did nothing to rein in abuses by insurance companies and PBMs who ultimately decide what medicines are covered and what patients pay at the pharmacy.

Chris Meekins, a health policy analyst at Raymond James, said drug companies won, even though they are complaining. For all the rhetoric from Democrats about going after Big Pharma, the result was not nearly as bad as it could have been.

“This isn’t really that consequential. And the fact that CMS felt the need to try to make it seem like these cuts are huge by comparing it to list price, which was never what the comparison was going to be to, just makes it that much more misleading,” Meekins said, noting that many of the drugs likely had only a small discount from existing rebates.

He added drug company’s stocks have been largely unaffected.

“When you peel back the numbers, if it was that big of a win, you wouldn’t see stock prices up,” he said.

Still, Democrats and Democratic-allied groups have been heaping praise on the effort as a victory over the pharmaceutical industry.

“Exorbitant prices should never stand between Americans and the life-sustaining medications they need. This announcement will save patients and taxpayers billions of dollars and these savings will grow as Medicare negotiates the prices of even more drugs,” Sen. Amy Klobuchar (D-Minn.) said in a statement.

Klobuchar, who for years has sponsored bills to allow Medicare drug price negotiation, said during a call with reporters Wednesday that she knows the work isn’t done and acknowledged industry lobbying and lawsuits.

“We’ve got the law on our side. We’ve got the facts on our side, and we have the people on our side. We’re going to get this done,” Klobuchar said.

Leslie Dach, chair of Democratic-aligned group Protect Our Care, said the announcement was “40 years in the making.”

“The Biden-Harris administration and Democrats in Congress stood up to the greed of big drug companies and won, and now prices will come down for millions of seniors,” Dach said.

Biden and Harris are expected to give remarks about the end of the negotiations Thursday.

Updated at 12:10 p.m. ET