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The First Ten: The Initial Round of Drugs Subject to Medicare Price Negotiations

By: David Ostrowsky

Traditionally, August is a slow news month. Congress is on recess; dignitaries have ensconced themselves in their summer homes; many reporters are on vacation. Invariably, the waning days of summer don’t appear conducive to delivering breaking news.

Not this year, however. Indeed, August 2023 will go down as a momentous period of time in American history. A month that was dominated by headlines involving criminal charges brought against former President Donald Trump ended with a healthcare development that will surely impact an untold number of Americans for the foreseeable future.

On August 29, President Biden unveiled the first ten prescription drugs that will be subject to price negotiation with Medicare (Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara, Fiasp and NovoLog), representing a watershed moment for Democrats who have spent years clamoring for lower prescription costs. The Medicare Drug Price Negotiation Program was a key component of the
Inflation Reduction Act, which also caps the monthly out-of-pocket cost of insulin at $35 for Medicare enrollees, enabling the U.S. government to directly negotiate with drug manufacturers for the first time in the program’s 58-year history. When the new prices for the aforementioned drugs that treat heart disease, certain cancers, diabetes, and autoimmune diseases go into effect in 2026, over nine million Medicare recipients will enjoy significant cost savings. It’s worth noting that Medicare beneficiaries taking the ten drugs chosen for negotiation paid an aggregate total of $3.4 billion in out-of-pocket costs for such medications in 2022, per the Department of Health and Human Services.

“For far too long, Americans have paid more for prescription drugs than any major economy,” Biden remarked in an official statement released from The White House. “And while the pharmaceutical industry makes record profits, millions of Americans are forced to choose between paying for medications they need to live or paying for food, rent, and other basic necessities. Those days are ending.”

Big Pharma, as Biden alluded to, is naturally not so giddy about this news. In fact, the pharmaceutical industry has been hellbent on hindering such efforts, recently filing eight lawsuits in federal courts across the U.S. declaring the program unconstitutional. However, as has been the consensus among legal experts, the Biden administration has opined that there is no provision in the U.S. Constitution that prevents it from negotiating medication prices.

“The Biden-Harris Administration isn’t letting anything get in our way of delivering lower drug costs for Americans,” Secretary of Health and Human Services Xavier Becerra said in a statement back in June. “Pharmaceutical companies have made record profits for decades. Now they’re lining up to block this administration’s work to negotiate for better drug prices for our families. We won’t be deterred.”

If pharma companies opt not to comply with the process, they will have to pay an excise tax of up to 95% of the medications’ U.S. sales or remove all their products from the Medicare and Medicaid markets. Some in the pharmaceutical industry contend that many of the medications on the list already have large rebates and discounts due to negotiations that currently occur in Part D insurance plans while others predict that the actual penalty will run as high as 1,900% of sales. And, of course, this program will not subside in 2026: per the Inflation Reduction Act, the federal government can choose up to fifteen more drugs for negotiation in 2027, another fifteen drugs for 2028, and as many as 20 more drugs each year thereafter.

But Biden has made it abundantly clear that he is not backing down against Big Pharma. After all, taking on Big Pharma is central to his larger “Bidenomics” vision of rebuilding the American economy from the middle out and the bottom up.

“Let me be clear: I am not backing down,” Biden said on the morning of the major unveiling. “There is no reason why Americans should be forced to pay more than any developed nation for life-saving prescriptions just to pad Big Pharma’s pockets.”

But Big Pharma, and its supporters such as
lobby group Pharmaceutical Research and Manufacturers of America (PhRMA), don’t see it that way. They see the drug repricing program as the U.S. government having unfettered power, which they say would, in effect, stymie innovation in medical research and development.

As Ameet Sarpatwari, an assistant professor at Harvard Medical School, told NPR following the August 29 announcement, “This is going to be a heavyweight battle.”