The Biden administration on Tuesday released its list of ten prescription drugs that will be subject to first-ever price negotiations by the U.S. Medicare health program that covers 66 million people, with Bristol Myers Squibb (BMY.N) and Pfizer (PFE) bestselling blood thinner Eliquis. N) among them.
President Joe Biden’s signature Inflation Reduction Act (IRA), signed into law last year, allows the Medicare health program for Americans age 65 and older to negotiate prices on some of the most expensive drugs.
“There is no reason Americans should be forced to pay more than any developed country for life-saving prescriptions just to line the pockets of Big Pharma,” Biden said in a statement.
He said once this is implemented, negotiated drug prices will fall for up to 9 million seniors, who currently pay as much as $6,497 in out-of-pocket expenses per year for these prescriptions.
Drugs on the list include Merck & Co’s (MRK.N) diabetes drug Januvia, Johnson & Johnson’s (JNJ.N) Eliquis rival Xarelto, and AbbVie’s (ABBV.N) leukemia treatment Imbruvica.
Other drugs on the list include Amgen’s (AMGN.O) rheumatoid arthritis drug Enbrel, Boehringer Ingelheim and Eli Lilly’s (LLY.N) diabetes drug Jardiance, J&J’s arthritis and Crohn’s disease Stelara, and insulin from Novo Nordisk (NOVOb.CO ).
Drugmaker shares remained largely flat in premarket trading.
This kicks off the negotiation process for the ten drugs whose new prices will come into effect in 2026. The program aims to save $25 billion annually in drug prices by 2031.
US laws had prohibited the Medicare drug program from negotiating pharmaceutical prices as part of the prescription drug program that began about twenty years ago.
The U.S. Centers for Medicare and Medicaid Services (CMS) spent $50.5 billion on the ten drugs between June 1, 2022, and May 31, 2023, the period used to determine which drugs were eligible for negotiation. That was about 20% of the total cost of drugs in the Medicare drug program, known as Part D.
Wells Fargo analyst Mohit Bansal said the savings realized from negotiating Jardiance, Januvia, Farxiga, and Insulin Aspart, which have cost the agency about $16.5 billion, could potentially free up CMS’s budget and make it easier to can make to cover diabetes or obesity medications.
Pharmaceutical Research and Manufacturers of America (PhRMA), the industry lobby, said many of the drugs on the list are already getting significant discounts through private market negotiations.
Drug companies including Bristol Myers, Johnson & Johnson, Merck, UK-based AstraZeneca (AZN.L), and Germany-based Boehringer Ingelheim also have the US Department of Health and Human Services (HHS), which oversees the Medicare agency, sued in an attempt to derail the pricing process.
Americans pay more for prescription drugs than patients in all other developed countries. Under the program, the minimum discount off a drug’s list price will be 25%, but the government could trade for much bigger discounts.
BMO Capital Markets analyst Evan Seigerman said that while the list includes many major revenue generators for pharmaceutical companies, many of them will face competition soon after or even before 2026, which is expected to reduce their profitability.
The ten initial drugs were chosen based on certain Medicare criteria. They must be sold in pharmacies, must not face substantial generic competition, and have been on the market for at least nine years – thirteen years for more complex biotech drugs.
Now that the list is out, drugmakers have until October 1 to sign agreements to participate in the talks and until October 2 to submit data on their drugs, including research and development and manufacturing costs, information on patent applications, and revenue and sales volume.
Unless blocked by a court, the Medicare agency will publish the new agreed prices on September 1, 2024.
Of the lawsuits filed to date, the U.S. Chamber of Commerce — the country’s largest business lobby group — is seeking an injunction against the price caps in a federal court in Ohio.
Reporting by Patrick Wingrove, Mike Erman, Manas Mishra in Bengaluru and Nandita Bose in Washington; Edited by Caroline Humer, Bill Berkrot, and Chizu Nomiyama
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