The first round of negotiations under the Inflation Reduction Act will save Medicare $6 billion in 2026, the Biden administration announced Thursday.
The final prices will be released later today for the first 10 drugs subject to negotiation. In addition to the savings for taxpayers, Biden administration officials estimated that Medicare patients will save $1.5 billion in out-of-pocket costs in 2026.
Xavier BecerraOver a decade, the Congressional Budget Office has predicted that taxpayers’ savings from the negotiations will total $100 billion, HHS Secretary Xavier Becerra told reporters on a call ahead of the announcement.
All drugmakers participating in negotiations have agreed to the government’s final offer, officials told reporters, closing the book on the first round of a process that several pharmaceutical companies continue to fight in court.
The negotiated prices will take effect in 2026 for Medicare’s drug benefit, which covers about 50 million people, mostly senior citizens.
But it may be hard, at least immediately, to know how much the government saved on a drug-by-drug basis. Medicare’s drug benefit is run by private insurance plans, which negotiate rebates and discounts on their own — what’s known as the net price. While government negotiators took those discounts into account in their talks with drugmakers and they’re included in the $6 billion in savings, the net prices for individual drugs won’t be released. That makes it hard to know exactly how much pharma companies conceded compared to the discounts they were already giving.
“The negotiations were comprehensive. They were intense. It took both sides to reach a good deal,” Becerra told reporters.
Legal battles
Pharmaceutical companies have heavily criticized the negotiation process, likening it to price-setting. Seven companies filed lawsuits, and five of those — from Bristol Myers Squibb, Boehringer Ingelheim, Johnson & Johnson, AstraZeneca and Novo Nordisk — have been rejected in federal courts. Those companies have all appealed.
Multiple judges determined that participation in the Medicare negotiation program is voluntary, and Connecticut Federal Judge Michael Shea emphasized last month that drugmakers can still pull out of Medicare altogether if they don’t like the terms, even if they’ve already agreed to a negotiated price.
“We showed that major progress can be made for the American people when we work together to take on special interests, even as Big Pharma continues to go to court to try to block lower prices for consumers,” President Joe Biden said in a statement on Thursday.
While drugmakers have not directly commented on the negotiated prices, many said during earnings calls in recent weeks that they’ve seen the government offers and factored the results into financial guidance.
Anna Kaltenboeck“Now that we have seen the final price, we’re increasingly confident in our ability to navigate the impact of IRA on Eliquis,” Bristol Myers CEO Chris Boerner said on the company’s earnings call last month, referring to the company’s blockbuster blood thinner.
AstraZeneca’s biopharma business unit head Ruud Dobber likewise said last month that “even with modeling that impact, we still expect to deliver on our long-term outlook.”
ATI Advisory’s Anna Kaltenboeck, who co-authored the IRA’s drug-negotiation section, told Endpoints News ahead of the announcement that she expects negotiated prices will be “at or below” current net prices, or what a manufacturer actually receives after rebates and discounts.