Medicare Is Negotiating Medication Prices: What Will That Mean for Your Prescription Costs?
Key takeaways:
Medicare can now negotiate the prices of high-cost medications, thanks to the Inflation Reduction Act of 2022. The Medicare Drug Price Negotiation Program includes single-source medications without generic or biosimilar competition.
The 10 drugs selected in August 2023 for the first round of negotiations are covered under Medicare Part D and treat conditions including diabetes, heart failure, and psoriasis. The lower prices for these 10 medications will be announced in 2024 and will be effective on January 1, 2026.
Medicare’s discounts may not make your prescriptions more affordable. Many people with Medicare Part D will see more relief from the $2,000 out-of-pocket limit for prescriptions that becomes effective in 2025.
Table of contents
The Inflation Reduction Act of 2022 (IRA) brought financial relief to many Medicare enrollees in 2023 by capping out-of-pocket costs for insulin at $35 a month. But the federal law could provide more savings for consumers in coming years.
The Medicare Drug Price Negotiation Program, activated in 2023 as part of IRA, enables Medicare to negotiate lower medication prices. The first 10 medications selected for negotiation include diabetes treatments and blood thinners that cost Medicare more than $50 billion in one year and account for 20% of the program’s pharmacy drug costs, according to the U.S. Department of Health and Human Services (HHS).
The first medications selected for the Medicare Drug Price Negotiation Program are:
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The lower prices for the initial 10 medications will be announced on September 1, 2024 and will be effective on January 1, 2026. Another 50 medications covered under Medicare Part D and Part B will be chosen for negotiation through 2029.
Medicare’s discounts, however, may not significantly reduce costs for consumers. People with Medicare Part D may find the most relief from the IRA’s $2,000 out-of-pocket limit for prescriptions that becomes effective in 2025.
What is the Medicare Drug Price Negotiation Program?
The Medicare Drug Price Negotiation Program is a result of the IRA. This historic federal law aims to reduce healthcare costs in several ways, which includes allowing Medicare — for the first time — to negotiate the prices of medications.
Some medications are excluded from price negotiation, including:
Certain orphan drugs for rare conditions
Low-spend Medicare drugs
Plasma-derived products
Small biotech drugs
The selected drugs don’t necessarily have the highest prices, but they represent large expenses for Medicare. The program is projected to save the government $98.5 billion over a decade and aims to make prescriptions more affordable for consumers.
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What medications will Medicare negotiate?
The first 10 medications selected for negotiation are covered by Medicare Part D. They were selected based on their total gross covered prescription drug costs under Part D from June 2022 to May 2023.
Gross covered prescription drugs costs are the paid expenses under a Part D plan during a 12-month period (typically a coverage year) including dispensing fees, but excluding administrative costs.
The drugs slated for negotiation are older treatments that have been approved or licensed by the FDA for at least 7 years (or 11 years for biologics). They are single-source, high-cost medications for which there are no generics or biosimilars.
The initial 10 medications are listed below.
Drug name (manufacturer) | Commonly treated conditions | Total Part D gross covered prescription drug cost from June 2022 to May 2023 | Number of Medicare Part D enrollees who used the drug from June 2022 to May 2023 |
Eliquis (Bristol Myers Squibb) | Prevention and treatment of blood clots | $16.5 billion | 3,706,000 |
Jardiance (Boehringer Ingelheim/Eli Lilly) | $7.1 billion | 1,573,000 | |
Xarelto (Johnson & Johnson) | Prevention and treatment of blood clots, reduces risk of major cardiovascular events for people with coronary artery disease or peripheral artery disease | $6 billion | 1,337,000 |
Januvia (Merck) | Diabetes | $4.1 billion | 869,000 |
Farxiga (AstraZeneca) | Diabetes, heart failure, chronic kidney disease (CKD) | $3.3 billion | 799,000 |
Entresto (Novartis) | Heart failure | $2.9 billion | 587,000 |
Enbrel (Amgen) | $2.8 billion | 48,000 | |
Imbruvica (Johnson & Johnson/AbbVie) | Blood cancers | $2.7 billion | 20,000 |
Stelara (Johnson & Johnson | Psoriasis, psoriatic arthritis, Crohn’s disease, ulcerative colitis | $2.6 billion | 22,000 |
Fiasp, Fiasp FlexTouch, Fiasp PenFill, NovoLog, NovoLog FlexPen, NovoLog PenFill (Novo Nordisk) | Diabetes | $2.6 billion | 777,000 |
How will Medicare negotiate with drug manufacturers?
The Centers for Medicare & Medicaid Services (CMS), a division of HHS, reports that its goal during the medication price negotiations is to promote transparency and engagements with drug manufacturers and the public.
Steps in the negotiation process include:
Drug companies with a selected medication and the public will have an opportunity to submit information about the first 10 medications to CMS no later than October 2, 2023.
Each drug company will be invited to a meeting about its data submission in late 2023.
Ten patient-focused listening sessions will be scheduled from October 30, 2023 to November 15, 2023. Each day is dedicated to one drug. The sessions are open to the public and will be livestreamed. Medicare enrollees, caregivers, consumer organizations, and other interested parties can register to speak at these sessions from September 1, 2023 to October 2, 2023.
CMS plans to send an initial offer for a maximum fair price for each drug no later than February 1, 2024. The drug companies will have 30 days to accept the initial offer or provide a counteroffer.
If a maximum fair price is not reached through the initial offer and counteroffer process, CMS will invite the manufacturers with unresolved negotiations to meetings in spring and summer 2024. The negotiation period ends on August 1, 2024.
How will consumers benefit from Medicare negotiating drug prices?
With lower medication prices, consumer out-of-pocket costs should decrease (ideally). Medication adherence, which includes filling prescriptions and not skipping doses, may also improve if patients are better able to afford their medications.
Medicare enrollees spent $3.4 billion out of pocket in 2022 for the 10 initial drugs that have been selected for negotiation. According to HHS, the average annual out-of-pocket costs per enrollee ranged from $5,247 for Imbruvica to $121 for NovoLog in 2022. For enrollees who did not receive financial assistance, the range was $6,497 per enrollee for Imbruvica to $261 per enrollee for NovoLog.
Are there any alternative analyses of the drug negotiation program?
Kenneth Thorpe, PhD, chair of the Department of Health Policy & Management in the Rollins School of Public Health at Emory University in Atlanta, objects to the approach of attempting to lower the cost of 10 medications that account for 20% of Medicare’s pharmacy drug spending.
“This was sold as ‘we’re going to really get the high price of drugs down.’ That’s not what this is. They’re not targeting high-priced drugs. They’re targeting high-used drugs to treat chronically ill patients,” said Thorpe, who served as HHS deputy assistant secretary for health policy from 1993 to 1995. While in this role, he coordinated all financial estimates and program impacts for President Bill Clinton’s healthcare reform proposals.
“The $2,000 out-of-pocket cap is the key. It’s still too high, I think,” he told GoodRx. “I would have liked to have seen it lower, and I would have liked to have seen the legislation mimic what Medicare Advantage does — not just cap insulin, but have caps or eliminate cost-sharing for mood disorders, diabetes drugs, cholesterol medications — things that we know are really effective in reducing overall costs and keeping these patients healthy.”
Thorpe also believes the advocates have “oversold” the benefits to consumers — not to mention the fact that the lower negotiated medication costs of the program don’t go into effect for another 2 years.
“They’re not really negotiations. It’s just going to be pure-old European price-setting,” he said. “I’m not against saving Medicare money, but let’s be honest about what the program is. It’s a budget exercise to save Medicare money. … The primary tool that benefits patients is that out-of-pocket cap.”
Additionally, the first round of negotiations may be too late for drugs such as Januvia and Farxiga, which are set for patent expirations and exclusivity in 2026 — an opening for generic competition that could lead to lower costs for patients.
Has there been pushback to price negotiation?
Yes. Several companies whose medications are among the first 10 chosen for negotiation have sued the Biden administration. The Pharmaceutical Research and Manufacturers of America and other groups also filed lawsuits. The legal battles started even before the list was released. The U.S. Chamber of Commerce and local chamber groups from across the country requested a preliminary injunction, which would immediately stop the law from being implemented if granted.
Depending on the outcome of legal challenges, the price negotiation program may never go into effect.
Why can’t Medicare negotiate the prices on other medications?
CMS can’t negotiate prices for other drugs — yet. The initial 10 are just the first round for price negotiations. Another 50 medications covered under Medicare Part D and Part B — drugs administered in a doctor’s office — will be chosen for negotiation through 2029.
How can I save on medications?
GoodRx can help you find the lowest price on your prescription at a pharmacy near you. It’s fast, free, and easy to use. You can save on prescriptions even if you have Medicare Part D coverage. That’s because your formulary may not have the medications you need or your out-of-pocket costs, such as your copay, could be unaffordable.
So, try GoodRx instead with these easy steps:
Download the GoodRx app or visit goodrx.com.
Enter your medication name and details to compare prices.
Find the lowest price and get your coupon.
Show your pharmacist your GoodRx coupon.
It’s important to note that GoodRx is not insurance and cannot be combined with your Medicare, Medicaid, or private health insurance coverage.
The bottom line
The Medicare Drug Price Negotiation Program is an unprecedented attempt to reduce what the federal government pays for certain medications. And it could make prescriptions more affordable for Medicare enrollees. It’s part of the Inflation Reduction Act of 2022, which promised to lower the cost of healthcare.
The first 10 medications set for negotiation are covered under Medicare Part D prescription plans. The drugs, which treat diabetes, heart failure, and other chronic conditions, were selected in August 2023. Their lower prices will be announced in 2024 and take effect in 2026.
Though the price negotiation program is designed to cut costs for consumers, Medicare enrollees may find the earliest financial relief in 2025 when Medicare Part D plans will be required to have a $2,000 out-of-pocket maximum for prescriptions.
Why trust our experts?
References
Assistant Secretary for Planning and Evaluation. (2023). Medicare enrollees’ use and out-of-pocket expenditures for drugs selected for negotiation under the Medicare Drug Price Negotiation Program. U.S. Department of Health and Human Services.
Centers for Medicare & Medicaid Services. (n.d.). How to submit the 2023 Public Submission Form for reporting evidence about selected drugs and their therapeutic alternatives.
Centers for Medicare & Medicaid Services. (2023). Fact sheet: Key information on the process for the first round of negotiations for the Medicare Drug Price Negotiation Program.
Centers for Medicare and Medicaid Services. (2023). Medicare Drug Price Negotiation Program: Selected drugs for initial price applicability year 2026.
CMS.gov. (2023). Medicare drug price negotiation. Centers for Medicare & Medicaid Services.
CMS.gov. (2023). Medicare Drug Price Negotiation Program patient-focused listening sessions.
Code of Federal Regulations. (n.d.). Title 42 chapter IV § 423.322. Centers for Medicare & Medicaid Services.
Constantino, A. K. (2023). Medicare drug price negotiations may have a muted impact on drugmakers in the near term. CNBC.
Cubanski, J. (2023). FAQs about the Inflation Reduction Act’s Medicare Drug Price Negotiation Program. Kaiser Family Foundation.
Gardner, L. (2023). Drugmakers, trade groups push back against Medicare drug price negotiations. Politico.
MedlinePlus. (2021). Blood clots.
Myshko, D., et al. (2023). Lawsuits expected over Medicare drug price negotiation. Medical Economics.
Rapfogel, N. (2023). 5 facts to know about Medicare drug price negotiation. Center for American Progress.
Stolberg, S. G., et al. (2023). U.S. announces first drugs picked for Medicare price negotiations. The New York Times.
U.S. Department of Health and Human Services. (n.d.). HHS live streaming.
U.S. Department of Health and Human Services. (2023). HHS selects the first drugs for Medicare drug price negotiation.
U.S. Food and Drug Administration. (2020). Frequently asked questions on patents and exclusivity.
