The government announced final prices on Thursday for the first 10 drugs negotiated by Medicare under the Inflation Reduction Act, following months of back-and-forth between pharma companies and the government.
The negotiated prices are all considerably lower than the list prices for the drugs — in many cases by more than 50%. But it’s unclear how much lower they are than the net prices, which include the rebates and discounts that are almost universally used by insurers that operate individual drug plans. The government said it negotiated discounts of up to 79% from the list price, which would have resulted in 22% net savings in aggregate for Medicare in 2023.
Earlier Thursday, the administration announced that the law would save taxpayers $6 billion in 2026 and that patients would see about $1.5 billion in out-of-pocket savings. The negotiated prices will take effect in 2026 for Medicare’s drug benefit, which covers about 50 million people, mostly senior citizens.
For the first time, the government also shared some details of the negotiations. It said that for four drugs, the government accepted revised counter-offers from companies. For five drugs, the companies accepted the government's final written offer.
CMS described the negotiation process as “genuine” and “thoughtful” in its announcement on Thursday, noting that the government negotiated its initial offers upward following discussions with drugmakers.
“The negotiations were comprehensive. They were intense. It took both sides to reach a good deal,” HHS Secretary Xavier Becerra told reporters.
When asked for more details on the negotiation process, senior administration officials said CMS plans to publish explanations of the agreed-upon prices by March, including more information on the exchange of offers and negotiation discussions.
But it may be hard, at least immediately, to know how much the government saved on a drug-by-drug basis. Individual drugs' net price — what's actually paid after the private insurers who run the program get discounts and rebates — wasn't included in the government's announcement.
The administration did say, however, that the $6 billion in aggregate savings it obtained were based on net prices. Senior administration officials stressed that additional savings will come from the IRA’s $2,000 out-of-pocket price cap for seniors.
Several drugmakers, including Bristol Myers Squibb and Novartis, again made the argument that the negotiation process was not transparent or objective. AstraZeneca, Novo Nordisk and Novartis claimed they had no choice but to go through with negotiations since the alternative — walking away from Medicare and Medicaid altogether — would be detrimental to their businesses.
BMS, which makes the blood thinner Eliquis, said in a statement that the IRA “does not protect patients from potential increases to their cost sharing or restrictions in access” once the new price takes effect in 2026.
“The Centers for Medicare and Medicaid Services has made clear in their guidance that they are going to lean on their formulary review process in order to retain affordable access to these medications for people with Medicare,” HHS chief competition officer Stacy Sanders told Endpoints News on Thursday.
Leading up to Thursday’s announcement, pharmaceutical companies heavily criticized the negotiation process, likening it to price setting, and several have sued to block it. PhRMA, the trade group that represents the industry, called it a politics-driven process that would not help patients.
"There are no assurances patients will see lower out-of-pocket costs because the law did nothing to rein in abuses by insurance companies and PBMs who ultimately decide what medicines are covered and what patients pay at the pharmacy," the group said in a statement Thursday.
However, a handful of drugmakers emphasized on recent earnings calls that they’ve already factored negotiations into their near-term guidance.
“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, speaking about the company’s blockbuster blood thinner.
AstraZeneca’s biopharma business unit head Ruud Dobber said in July that “even with modeling that impact, we still expect to deliver on our long-term outlook.”
Seven of the companies filed lawsuits, and five of those — from Bristol Myers, Boehringer Ingelheim, Johnson & Johnson, AstraZeneca and Novo Nordisk — have been rejected in federal courts. Those companies have all appealed.
Editor’s note: This story has been updated to include additional comments made by drugmakers and senior administration officials.