Medicare to Select Drugs for Lower Price Negotiations

Medicare to Select Drugs for Lower Price Negotiations

According to The Hill, a news outlet in Washington, D.C., “The first ten drugs selected for Medicare price negotiation will be announced by Sep. 1 and will set the stage for unprecedented government action regulating drug costs, with billions of dollars at stake and scores of patients standing to benefit.

“Once the initial batch of drugs chosen for negotiations are announced, the years-long negotiation process — currently being challenged in courts — will kick off. The manufacturers of the Medicare Part D-covered drugs picked by the Centers for Medicare and Medicaid Services (CMS) will have one month to send in their agreements saying they will engage in the negotiation process.”

At the same time, however, the business publication Barron’s reports, "The pharmaceutical industry is launching a major legal assault against a new law that will allow Medicare to pay less for some high-price drugs, in an all-out effort to kill the program.”

Two months ago, four giant pharmaceutical companies and two industry groups “filed federal lawsuits accusing the program of being unconstitutional. Ultimately, the companies are signaling that they hope the Supreme Court will overturn the law, which for the first time allows Medicare to negotiate the prices it pays for certain medications.”

The article further points out, "For Medicare, the ability to begin negotiating the prices of some of the most expensive drugs could be a critical lever to bring down costs, which have climbed in recent years. Medicare Part D, its outpatient prescription drug benefit, spent $120 billion on drugs in 2018, up from $74 billion in 2009, as measured in 2018 dollars, according to the Congressional Budget Office. The negotiation program would save the federal government an estimated $98.5 billion by 2031. (For context, Medicare spent a total of $829 billion in 2021.)

“The program could also mean savings for seniors. KFF, an independent health policy group, says the law will ‘put downward pressure on both Part D premiums and out-of-pocket drug costs,’ though the scale of the reductions will depend on the details of the negotiations. …

“… While Medicare pays for thousands of different drugs, a relative handful of high-price, newer medicines account for much of its pharmaceutical spending. In 2021, 10 drugs accounted for 22% of gross spending for its Part D prescription drug benefit, according to a recent KFF analysis. It’s those medicines, like Pfizer and Bristol’s blood thinner Eliquis, and Eli Lilly’s diabetes injection Ozempic, that the law is targeting.

“A pharma victory would certainly be a blow to the savings Medicare and U.S. seniors hope to gain. [Zachary]Baron [a health care law expert and Georgetown Law] is also concerned that it could have larger ramifications. In an article in the policy journal Health Affairs, he argued that the claims brought by Bristol and Merck on violations of the Takings Clause could, if successful, open the door for healthcare providers to challenge the negotiated rates that Medicare pays them. “Such a result would have devastating consequences for Medicare’s ability to contain costs and promote other efficiencies,’ he writes.”

TSCL will be keeping a close watch on these proceedings.  We were pleased when Congress finally passed the legislation allowing Medicare to lower drug prices.  However, it is only the beginning of what needs to be done, and we will continue our efforts to fight for lower drug prices for seniors.