Medicare Drug Price Negotiation: What To Know

Medicare is the largest purchaser of prescription drugs in the United States, covering more than 60 million seniors and people with disabilities (4). However, unlike private companies, Medicare has not been allowed to directly negotiate drug prices with manufacturers, resulting in higher costs for beneficiaries and taxpayers. In 2023, the Biden-Harris administration announced a historic reform to lower drug prices by allowing Medicare to negotiate the prices of up to 60 drugs covered under Medicare Part D and Part B, starting with a set of ten (1). The first ten drugs, which were announced on August 29th, were selected based on their high total spending and out-of-pocket costs for Medicare enrollees and include treatments for cancer, heart failure, and diabetes (5). Many of these drugs also have high costs due to the fact that they do not face competition from rivals or generic versions (5). Medicare drug price negotiation is expected to be a historic change in American healthcare. 

Medicare drug price negotiation is occurring as part of the Inflation Reduction Act, a law passed in 2022 to reduce healthcare costs for Americans (3). Notably, the Inflation Reduction Act of 2022 put a ceiling on out-of-pocket costs for insulin at $35 a month (2). Moving forward, the Inflation Reduction Act will also create a $2,000 out-of-pocket limit for prescriptions that goes into effect in 2025 (2). 

Now that the first ten drugs to undergo negotiations have been announced, the Center for Medicare and Medicaid Services (CMS) will engage in negotiations with drug companies throughout 2023 and 2024 (4). Drug manufacturers and the general public are able to submit comments about these ten drugs to the CMS until October 2nd, and the CMS will hold ten patient-focused listening sessions from October 30th to November 15th (2). Negotiations will conclude by August 2024, and the negotiated prices will go into effect in 2026 for these first ten drugs. Afterward, the CMS plans to negotiate 15 more drugs covered under Part D to go into effect in 2027, 15 additional drugs for 2028, and 20 more drugs for 2029 (3).  

The drug industry and its allies have fiercely opposed this reform, arguing that it would stifle innovation and violate the Constitution (5). Drug manufacturers have filed multiple lawsuits to challenge the legality of the program and prevent its implementation; depending on the court decisions on these lawsuits, Medicare drug price negotiation efforts may come to an end (5). However, the administration and its supporters have defended the reform as a necessary step to ensure access and affordability for millions of Americans who depend on prescription drugs for their health and well-being. 

Furthermore, some experts suggest that individual consumers may not see much benefit from the Medicare drug price negotiations themselves (2). The program is more likely to provide cost savings for Medicare, while average consumers may save more on their healthcare costs from the out-of-pocket limit for prescriptions that goes into effect in 2025 (2). 

References

1. “FACT SHEET: Biden-Harris Administration Announces First Ten Drugs Selected for Medicare Price Negotiation.” WhiteHouse.Gov, August 29 2023, https://www.whitehouse.gov/briefing-room/statements-releases/2023/08/29/fact-sheet-biden-harris-administration-announces-first-ten-drugs-selected-for-medicare-price-negotiation/ 
2. George, Cindy. “Medicare Is Negotiating Medication Prices: What Will That Mean for Your Prescription Costs?” GoodRX, Sept 15 2023, https://www.goodrx.com/insurance/medicare/drug-price-negotiation 
3. “HHS Selects the First Drugs for Medicare Drug Price Negotiation.” U.S. Department of Health and Human Services, Aug 29 2023, https://www.hhs.gov/about/news/2023/08/29/hhs-selects-the-first-drugs-for-medicare-drug-price-negotiation.html 
4. “Medicare Drug Price Negotiation.” CMS.gov, Sept 19 2023, https://www.cms.gov/inflation-reduction-act-and-medicare/medicare-drug-price-negotiation 
5. Stolberg, Sheryl Gay and Rebecca Robbins. “U.S. Announces First Drugs Picked for Medicare Price Negotiations.” The New York Times, Aug 29 2023, https://www.nytimes.com/2023/08/29/us/politics/medicare-drug-pricing-negotiations.html