Dept. of HHS begins Medicare price negotiations

The HHS began negotiations with pharmaceutical companies with the aim of decreasing drug prices for Medicare patients. // Photo courtesy of Alex Brandon Associated Press

On Aug. 29, 2023, the U.S. Department of Health and Human Services (HHS) announced the first 10 drugs under Medicare whose prices they will begin negotiating. Due to the Inflation Reduction Act of 2022 (IRA), Medicare is now allowed to negotiate better prices for the elderly. According to the White House, Medicare’s Part D prescription coverage enrollees paid $3.4 billion out-of-pocket for the 10 drugs now being negotiated. These include Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara and Fiasp. Medicare enrollees can begin to see lower prices in 2026. 

These drugs are used to treat blood clotting, Type 2 Diabetes, heart failure, rheumatoid arthritis, blood cancer
and Crohn’s disease. 

President Biden said, “for far too long, Americans have paid more for prescription drugs than any major economy. 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.”

The ongoing negotiations are expected to reduce the federal deficit by $129 billion in the next eight years. 

The HHS will choose 15 more drugs for negotiations in 2025, with their new prices tentatively going into effect at the beginning of 2027. 

Sen. Jon Tester, a Montana Democrat, said in a statement that his constituents “should never have to make the choice between life-saving medication or putting food on the table.”

“I am proud to have stood tough against large pharmaceutical corporations and successfully demand that they stop unnecessarily jacking up prices on folks across the state. Montanans sent me to Washington to deliver results, and I will continue to take on anyone to lower costs,” Tester said.

Senate Majority Leader Chuck Schumer also praised the act and the following negotiations. 

“For years, politicians promised to take on the big drug companies and empower Medicare to negotiate lower drug prices for consumers,” said Schumer. “With the Inflation Reduction Act, Democrats have delivered. Soon millions of Americans will see lower prices on some of the most expensive and widely used prescription drugs.”

Under the Medicare Part D program, which helps cover prescription drugs, Medicare works with drug companies to provide subsidized prices for its users. The law that previously established this section included a non-interference clause, preventing the HHS from directly negotiating prices with manufacturers. As a result, the federal government could not leverage lower prices, and Part D spending has concentrated on a few expensive drugs with low competition. 

The KFF, formerly known as the Kaiser Family Foundation, is a nonpartisan data source for health policy research, polling and journalism. Their 2021 report by Juliette Cubanski and Tricia Neuman displays Medicare’s disproportionate spending.

“In 2021, Medicare Part D covered more than 3,500 prescription drug products, with total gross spending of $216 billion, …”   Cubanski and Neuman said, “[and] the 10 top-selling Part D drugs accounted for 0.3% of covered drugs and 22% of total gross Medicare drug spending in 2021. The top 100 drugs, representing just 3% of covered drugs, accounted for 61% of total gross spending that year.”

The specified drugs, such as Eliquis and Jardiance, are the same ones that the IRA clause will affect. It  amends the Part D non-interference clause and now requires the Secretary of HHS (currently Xavier Becerra) to negotiate drug prices directly with their parent companies. 

Announcements of negotiations come poignantly for President Biden, who has made lowering healthcare prices a pillar of his 2024 reelection campaign. Since signing the IRA into law, Biden has touted it as one of his most significant legislative victories.

“We’ve reached this milestone because of the Inflation Reduction Act,”  Biden said in his statement on Aug. 29, “one of the most significant laws ever enacted, and one that passed with the leadership of Democrats in Congress. We took on Big Pharma and special interests, overcoming opposition from every Republican in Congress, and the American people won.”

However, Biden’s actions have received significant opposition from Republicans and pharmaceutical companies. They argue that the IRA is stifling the development of clinical programs and decreasing treatments because of the new price controls. Opponents also argue that it may increase prices for consumers. Furthermore, Big Pharma companies have already filed eight lawsuits challenging the program, arguing that price controls on these drugs are illegal. 

Large companies like AstraZeneca and Johnson & Johnson already have court dates set for later this year in which they will argue in a federal court that the IRA’s Medicare program is unconstitutional. According to Politico, most of their arguments claim that the act violates their first and fifth amendment rights, and they are seeking an injunction on the act’s implementation. 

Only time will show the effects of the Medicare drug price negotiations will be for consumers and for Biden’s campaign. The program is a significant step forward in making prescription drugs more affordable for all Americans.