First Drugs Selected for the Program
In our September Voice, we updated our readers on the status of the federal Inflation Reduction Act (IRA), focusing on the law’s key features relating to Medicare. Of particular importance we highlighted that the IRA created the Medicare Drug Price Negotiation Program, allowing the federal CMS (Centers for Medicare & Medicaid Services) to directly negotiate with drug manufacturers over the prices of certain high expenditure single source drugs without generic or biosimilar competition.
As reported in our last issue, there will be multiple rounds of drug selections and negotiations. The first round has begun with the CMS’s recent announcement of the first ten drugs to be negotiated. They are:
- Eliquis, made by Bristol-Myers Squibb, is used to prevent blood clotting, to reduce the risk of stroke.
- Jardiance, made by Boehringer Ingelheim, is used to lower blood sugar for people with Type 2 diabetes
- Xarelto, made by Johnson & Johnson, is used to prevent blood clotting, to reduce the risk of stroke.
- Januvia, made by Merck, is used to lower blood sugar for people with Type 2 diabetes.
- Farxiga, made by AstraZeneca, is used to treat Type 2 diabetes.
- Entresto, made by Novartis, is used to treat certain types of heart failure.
- Enbrel, made by Amgen, is used to treat rheumatoid arthritis.
- Imbruvica, made by AbbVie, is used to treat different types of blood cancers.
- Stelara, made by Janssen, is used to treat Crohn’s disease.
- Fiasp and NovoLog, insulins made by Novo Nordisk.
Note: During the time period (June 1, 2022 and May 31, 2023) used to determine which drugs were eligible for negotiation, about 8,247,000 people with Medicare Part D coverage used these drugs to treat a variety of conditions, such as cardio- vascular disease, diabetes, autoimmune diseases, and cancer. These selected drugs accounted for $50.5 billion in total Part D gross covered prescription drug costs, or about 20% of total Part D gross covered prescription drug costs during that time period. Source: CMS.
Program’s Future Timeline:
- October 1, 2023: By that date (after we went to press), drug manufacturers must sign agreements to join the negotiations.
- February 2024: CMS make an initial price offer to manufacturers and those companies have a month to accept or make a counteroffer.
- August 2024: Negotiations end.
- September 1, 2024: Agreed upon prices published.
- January 2026: Reduced prices go into effect
If a drug manufacturer declines to negotiate, it must either pay an excise tax of up to 95% of its medication’s U.S. sales or pull all its products from the Medicare and Medicaid markets.
According to the Congressional Budget Office (CBO), CMS’s negotiations with the pharmaceutical industry Is expected to save Medicare an estimated $98.5 billion over a decade. And, these savings should translate into lower costs for retirees.
DRUG MANUFACTURES SUING TO BLOCK PROGRAM
While CMS is proceeding forward with the Program, Merck, Johnson & Johnson, Bristol-Myers Squibb and Astellas Pharma are among the drug manufacturers suing to block the negotiation process. PhRMA (Pharmaceutical Research and Manufacturers of America), the drug industry’s biggest lobbying group, as well as the U.S. Chamber of Commerce, have also filed their own lawsuits.
Scattered in federal courts nationwide, their lawsuits have made similar claims that the Medicare price negotiations are unconstitutional. Among their constitutional claims, they argue the process would force drugmakers to sell their medicines at huge discounts, below market rates, violating the Fifth Amendment that obligates the government to pay reasonable compensation for private property taken for public use.
Also, they argue that the negotiating process violates drugmakers’ free speech rights under the First Amendment, essentially forcing companies to agree that Medicare is negotiating a fair price. They further contend that the talks violate the Eighth Amendment by levying an excessive fine if drugmakers refuse to engage in the process.
It’s been speculated that the pharmaceutical industry hopes to obtain conflicting rulings from federal appellate courts, which could fast-track the issue to the Supreme Court. It’s fair to say at this time that we haven’t heard the final word on this.