Last week, the White House announced the names of 10 prescription drugs that will be subject to the negotiating power of Medicare. The government expects prices will be slashed by half on average, with the first cuts taking effect in 2026. The complete list of drugs and their costs to Medicare includes:
- Bristol-Pfizer’s Eliquis, used as a blood thinner ($16.5 billion);
- Eli Lilly’s Jardiance, used for diabetes and heart failure ($7.1 billion);
- Johnson & Johnson’s Xarelto, used as a blood thinner ($6 billion);
- Merck’s Januvia, used for diabetes ($4.1 billion);
- AstraZeneca’s Farxiga, used for diabetes and heart failure ($3.3 billion);
- Novartis’ Entresto, used for heart failure ($2.9 billion);
- Amgen’s Enbrel, used for autoimmune diseases ($2.8 billion);
- AbbVie-J&J’s Imbruvica, used for blood cancers ($2.7 billion);
- J&J’s Stelara, used for autoimmune diseases ($2.6 billion); and
- Novo Nordisk’s NovoLog, used for diabetes ($2.6 billion).
The government had been prohibited by the 2003 law that created Medicare’s Part D program from negotiating drug prices with the drug manufacturers. But the Inflation Reduction Act (IRA), signed into law a year ago in response to growing fury over US drug costs that are the highest in the world, mandated the negotiations. Data show that the drugs on the list accounted for around $51 billion, or about 20%, of Part D’s prescription drug costs in the year ending May 31.
Eight companies and groups have already filed lawsuits to stop the drug negotiating program from taking effect. Besides the drug makers themselves, the group includes the U.S. Chamber of Commerce.
Big drugmakers have long fought to maintain their products’ patent protection and forestall the arrival of generic competition. The new law undercuts that strategy, demanding price concessions on products that have been on the market for years and have no generic alternatives.
To get around the law, drug companies are already launching drugs at much higher list prices so they can earn more before possibly facing Medicare negotiations, according to Evan David Seigerman of BMO Capital Market financial services company.
That may undermine some of the benefits to consumers the IRA was meant to foster, although the 2022 law will cap other out-of-pocket spending and expand subsidies for low-income patients.
The main argument against the new law that drug companies are using is that because developing new drugs is so expensive, it will reduce the number of drugs developed. However, the Congressional Budget Office (CBO) has estimated that the new program would reduce the deficit by $237 billion from 2022 to 2031, resulting in two fewer drugs introduced in the next decade and about eight fewer drugs in the decade after that.
Critics of Medicare negotiations have questioned the CBO estimate's reliability; in fact, other estimates place the loss of new drugs much higher.
At the same time, supporters of the drug negotiation law point out that drug companies spend more money advertising their drugs than they do on developing new drugs.
