10 prescription drugs Medicare will negotiate first

From AARP.org — By Dena Bunis —

The names of the first 10 Medicare drugs whose prices the federal government will negotiate directly with manufacturers were released today, Aug. 29. It marks the first time in history that the price of life-sustaining medications that millions of older Americans in the nation’s largest health program rely upon to prevent strokes and blood clots and to treat diabetes and cancer will be subject to direct negotiation.

“This is an important first step toward finally allowing Medicare to use its purchasing power to lower drug prices,” says Nancy LeaMond, AARP executive vice president and chief advocacy and engagement officer. “Medicare spends more than $135 billion on prescription drugs every year.”

Between June 2022 and May 2023, Medicare Part D spent $50 billion on the first 10 drugs selected for negotiation. That represents 20 percent of Part D spending during that time period. These medications were used by 8.2 million Medicare beneficiaries.

In the long run, Medicare beneficiaries who often must pay a percentage of a drug’s cost would benefit directly from lower negotiated prices, and the government could use the money saved to shore up Medicare’s finances. Negotiations will be expanded to include additional drugs in the years ahead, which would magnify the savings. Lower Medicare spending is also expected to lead to lower Part D premiums.

“Letting Medicare negotiate for lower prices is a commonsense solution that will save seniors money and cut government overspending,” LeaMond says.

How the drugs were picked

Under the Inflation Reduction Act, the government was required to make public by Sept. 1 the 10 medications covered by Medicare Part D that will be included in the first round of the price negotiation process. The manufacturers of those drugs and the Centers for Medicare & Medicaid Services (CMS) are scheduled to begin negotiating in early October, with the negotiated prices to take effect in 2026.

In order to be eligible for negotiation, medicines that are called small molecule drugs — those you typically get at the pharmacy and take in pill form — must have been on the market for seven years and not have a generic alternative. Biologics, which are drugs made from living organisms rather than chemicals, must have been available for 11 years with no nearly identical alternatives known as biosimilars available.

Federal officials drew the list of 10 from among the 50 medications that Medicare Part D spends the most on and that are used most by beneficiaries. All but three of the first 10 drugs are small molecule medicines. Drugmakers that decline to negotiate prices face substantial financial penalties or must stop participating in Medicare and Medicaid, the health coverage program for people with low incomes.

A long time coming

David Mitchell, founder of Patients for Affordable Drugs Now, has been fighting for lower prescription drug prices for years. Mitchell has an incurable blood cancer, and the drugs he takes together carry an annual price of almost $1 million. Mitchell’s copays are based on those high prices. One of his drugs, Eliquis, is on the list of drugs to be negotiated.

Price negotiations and the other reforms in the new law, Mitchell says, “will improve both the financial well-being and the health of people, more of whom are going to be able to afford to buy and take the drugs they need.”

When Congress first added a prescription drug benefit to Medicare nearly two decades ago, the law explicitly forbade the program to negotiate drug prices with pharmaceutical companies. AARP has been one of the most outspoken advocates for changing that policy. “Medicare negotiates a lot of different services that it covers, and prescription drugs were not a part of that until now,” says Leigh Purvis, AARP’s prescription drug policy principal. “Medicare has tens of millions of beneficiaries and brings a lot of bargaining power to the table and will be able to get better prices for people who are taking these drugs.”

Nearly 52 million Medicare beneficiaries are either enrolled in a Part D prescription drug plan or get drug coverage through their Medicare Advantage plan.

Patients already benefitting from the new law

While Medicare enrollees will not feel the first effects of negotiated drug prices until 2026, experts point to several other provisions of the new law that are already beginning to save beneficiaries money. Plus, other cost-saving provisions will be rolled out between now and when the negotiated prices kick in. The money the Medicare program saves through lower prices that will result from negotiations will enable the program to pay for the provisions that are cutting out-of-pocket costs for beneficiaries.

For example, the $35 cap for Medicare beneficiaries on monthly copays for insulin took effect in 2023, as did free vaccines including the shingles shot. Another provision that started this year requires drugmakers to pay rebates to Medicare for drugs whose prices increased more than the rate of inflation.

In 2024, beneficiaries with high drug expenses will get a break from paying any out-of-pocket costs once they reach the so-called catastrophic phase of the Part D prescription drug benefit. Part D premiums will not be allowed to increase more than 6 percent.

And in 2025, enrollees who either have a stand-alone Part D drug plan or whose prescriptions are covered by their Medicare Advantage plan will see their annual out-of-pocket costs capped at $2,000.

“Collectively, these policies will help lower costs for people on Medicare until the negotiations provision takes effect in 2026,” says Tricia Neuman, senior vice president and head of the Medicare program at KFF, formerly the Kaiser Family Foundation.

Overwhelming support for drug negotiations

For years, polls have shown overwhelming public support for allowing Medicare to negotiate prices. A 2021 KFF public opinion survey found that 83 percent of Americans favored allowing Medicare to negotiate drug prices.

That support crossed party lines, with 92 percent of Democrats, 85 percent of independents and 76 percent of Republicans in favor of price negotiations. A 2022 AARP poll found that 89 percent of voters in the most competitive congressional districts would be more likely to vote for a candidate who backed drug negotiations.

The impact of this new policy will go beyond the savings to Medicare beneficiaries who take the 10 drugs on the initial negotiations list. Medicare is scheduled to choose 15 additional drugs for negotiations with prices to take effect in 2027, another 15 in 2028 and 20 more medications annually starting in 2029.

“People are feeling the effects of high prescription drug prices through higher premiums and cost sharing, even if you aren’t taking the drugs yourself,” Purvis says. Lower prices for consumers also mean that the Medicare program will save money. The nonpartisan Congressional Budget Office has estimated that the negotiations provision of the new law will save Medicare $98.5 billion over 10 years.

Big drug companies fought against this provision and continue to oppose it. Manufacturers as well as several business groups have filed lawsuits in federal courts across the country in an attempt to derail the negotiation process. AARP and AARP Foundation recently filed a friend of the court legal brief urging a federal judge in Ohio to deny a request by several chambers of commerce that the negotiations process be delayed.

Dena Bunis covers Medicare, health care, health policy and Congress. She also writes the Medicare Made Easy column for the AARP Bulletin.

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