On Aug. 15, 2024, the Centers for Medicare & Medicaid Services (CMS) announced negotiated prices for the first 10 drugs selected under Medicare’s new Drug Price Negotiation Program, established by the Inflation Reduction Act of 2022. This announcement marked the end of a months-long negotiation process between CMS and the manufacturers of these 10 drugs, with new prices taking effect for Medicare beneficiaries on January 1, 2026.
With the conclusion of the first round of price negotiation, the Biden-Harris Administration can take credit for delivering on a 2020 campaign promise to give CMS the power to negotiate drug prices, with the ultimate goal of achieving savings for people with Medicare and for the Medicare program. And the successful conclusion of the first-ever Medicare drug price negotiation by the government provides Vice President Kamala Harris with a potent campaign talking point on an issue popular with voters.
In the near term, it may be difficult to assess the extent to which CMS was truly able to drive a hard bargain on each of these drugs, mainly because CMS is unable to publish the net prices that Medicare drug plans currently pay for the selected drugs (including rebates and other price concessions), due to the proprietary nature of these data. This is an important question, but not the primary focus of this article. Here we focus on the political implications of the Drug Price Negotiation Program, what role it might play in upcoming elections, and what the outcome of the election might mean for the fate of drug price negotiations in the future.
The results of CMS’ first-round price negotiations
According to the Administration, negotiated prices for the initial 10 drugs would have saved Medicare $6 billion if implemented in 2023, resulting in aggregate savings of 22% off net prices being paid by Part D plans. That level of price reduction is noteworthy, given that many of these drugs are in therapeutic classes that already have significant rebates negotiated by pharmacy benefit managers with drugmakers. The negotiated drug prices have a Goldilocks feel – big enough to achieve meaningful savings, but not so big to drive pharmaceutical companies to pull out of the program or to seriously threaten their profits.
In addition to Medicare savings, the negotiation program, in combination with other changes in the Inflation Reduction Act, will provide savings to beneficiaries. The negotiation program by itself is estimated to reduce out-of-pocket costs for Medicare beneficiaries by $1.5 billion in 2026. These savings come on top of those related to other prescription drug policies in the Inflation Reduction Act, such as the $2,000 cap on out-of-pocket drug spending that takes effect in 2025, and the $35 cap on insulin costs, drug price inflation rebates, and free vaccines.
How we got here
The 2003 law that established the Medicare drug benefit included language known as the “non-interference” clause that prohibited the federal government from getting involved in Medicare drug price negotiations. The non-interference clause became the subject of nearly two decades of debate among lawmakers – with Democrats generally in support and Republicans in opposition – about whether to grant the federal government authority to negotiate Medicare drug prices. The debate over the government playing a role in drug pricing – which is generally the case in other high-income countries – goes back even further, contributing to the political failure of the Clinton health plan in the early 1990s and before that, to the passage and subsequent repeal of the Medicare Catastrophic Coverage Act in the late 1980s.
The passage of the Inflation Reduction Act, which required Medicare to negotiate drug prices for a select number of drugs, was a significant political defeat for the usually powerful pharmaceutical industry. The law passed after a close, partisan vote in Congress, with all Democrats voting for the bill, all Republicans in the House and Senate voting against it, and Vice President Kamala Harris casting the tie-breaking vote in the U.S. Senate.
Drug price negotiation as a political and campaign issue
Health care costs and affordability are perennial concerns for voters, including the cost of prescription drugs. According to KFF polling, there is broad bipartisan support for proposals to lower prescription drug costs, including having the federal government negotiate drug costs. In 2021, a large majority of Democrats (95%), Independents (82%), and Republicans (71%) supported this approach to lowering drug prices, even when presented with arguments for and against it.
However, as of spring 2024, many people, including about half of older voters, don’t know about the Medicare Drug Price Negotiation Program, or at least were not aware prior to the August 15 announcement. Though it’s unlikely that drug prices specifically will be top of mind for most voters in the upcoming elections, voters could nonetheless be receptive to campaign messages related to increasing health care affordability and lowering prescription drug prices.
Democratic candidates up for reelection this coming November could be well positioned to talk up their victory over “Big Pharma,” as well as the specifics of the out-of-pocket savings for people with Medicare associated with drug price negotiations and other Medicare drug benefit improvements. In the same vein, House and Senate Republicans who voted against the law could find themselves having to defend why they voted against a popular set of policies that lower costs for seniors and produce savings for Medicare.
Where the presidential candidates stand
The results of the presidential election could have consequences for the future of the drug price negotiation program and other prescription drug provisions of the Inflation Reduction Act. For her part, Vice President Harris can tee off the announcement of negotiated Medicare drug prices to remind voters of concrete actions taken by the Biden-Harris Administration to lower drug prices for consumers, as well as further steps that could be taken, which she has endorsed. Harris has proposed to double down on the negotiation program by accelerating it, along with extending the $2,000 out-of-pocket drug spending cap and the $35 insulin copayment cap to people outside of Medicare.
For his part, former President Trump expressed support for allowing the government to negotiate drug prices as a candidate in the 2016 election, but did not push for the idea during his time in office and opposed a negotiation plan put forward by Congressional Democrats. He attempted to implement a variety of other drug pricing proposals, most of which were not implemented. In his 2024 campaign, Trump is proposing to “further reduce the cost of prescription drugs,” but what that means for existing efforts like drug price negotiation is not clear. However, he has specifically endorsed the idea of pegging what the U.S. pays for drugs to prices in other countries, though without any details. Meanwhile, allies of former President Trump who are working to lay the groundwork for a second Trump term through Project 2025 have called for a repeal of the Inflation Reduction Act, including the drug price negotiation program, as have some Republicans in Congress. However, Trump himself has not explicitly endorsed these proposals.
Where the drug industry stands
The pharmaceutical industry has been steadfast in its opposition to the Medicare Drug Price Negotiation Program, along with other approaches to lowering drug prices, with the exception of efforts to cap what patients themselves pay out of pocket. The industry has argued that allowing Medicare to negotiate drug prices would weaken incentives for research and development, dampen investments in drugs to treat rare diseases, and discourage post-market studies for new indications. For now, it’s difficult to draw firm conclusions about the impact of the negotiation program on drug companies’ long-term business strategy and investment decisions, but the program is in its very early stages. It remains to be seen whether companies will make changes to their research pipeline, bringing different types of pharmaceutical products to the market, or different and fewer new products altogether, and it may be difficult to attribute any of these changes directly to Medicare’s negotiation program.
Not long after initiation of the first-round negotiations, manufacturers of the 10 selected drugs and entities representing the pharmaceutical industry filed several lawsuits that raised constitutional and statutory challenges to the program. To date, none of these lawsuits has been decided in favor of industry plaintiffs, but they continue to work their way through the courts. In the event of conflicting rulings, an eventual hearing of one or more of these cases by the U.S. Supreme Court would be the likely outcome, which casts some uncertainty on the future of the program.
What’s next?
Even as legal challenges continue to wind their way through the courts, CMS will be proceeding with round two of the negotiation program in the coming months. The agency will announce the next 15 Part D drugs that meet the criteria for price negotiation by February 1, 2025, followed by negotiations with manufacturers of these drugs, with negotiated prices taking effect on January 1, 2027.
Just under three months out from the November presidential election, the announcement of Medicare’s negotiated prices gives Vice President Harris an opportunity to remind voters what the Biden-Harris Administration accomplished through its political victory over the pharmaceutical industry. Harris has already started to talk about what steps she would take as president to build on the prescription drug provisions in the law, as part of a broader platform that focuses on costs and affordability. Trump’s endorsement of several proposals to lower drug prices was a noteworthy feature of his health policy agenda when in office, but if he aligns himself with GOP proposals to repeal the Inflation Reduction Act, including the negotiation program, that could portend a very different future for Medicare drug price negotiation than would be likely under a Harris administration.