Key Takeaways:
- The Biden Administration anticipates that the first round of negotiated drug prices will yield approximately $6 billion in savings for Medicare by 2026, with $3.7 billion expected in the first year alone.
- The Medicare price reductions for the first ten selected drugs range from 38% to 79%, marking a substantial decrease in costs for these medications under the Inflation Reduction Act.
- If the negotiated prices had been in effect in 2023, Medicare patients could have saved around $1.5 billion in out-of-pocket expenses, though the full impact of savings may vary based on individual drug benefits.
The Biden Administration has revealed that the first round of drug price negotiations under the Inflation Reduction Act (IRA) will result in approximately $6 billion in Medicare savings by 2026. The Centers for Medicare and Medicaid Services (CMS) have successfully negotiated price reductions for ten selected drugs, marking a historic shift in how the U.S. government manages drug costs for Medicare beneficiaries.
The Medicare price negotiations, enabled by the IRA, have led to significant price cuts for the first ten drugs selected for negotiation. These reductions range from 38% to 79% compared to their original list prices. Notably, MSD’s Januvia (sitagliptin) experienced the largest price reduction of 79%, followed closely by a 76% reduction for Novo Nordisk’s branded insulin aspart products. Despite these substantial cuts, the exact net prices of these drugs remain confidential, as they are subject to existing rebates and discounts negotiated by Medicare Part D health plans. The newly negotiated prices are set to take effect on January 1, 2026.
Comparison with European Markets and U.S. Federal Pricing
The Biden Administration has projected that these negotiations will create $6 billion in savings for Medicare in 2026, with $3.7 billion anticipated in the first year alone. Over the next decade, the Congressional Budget Office predicts that the IRA will generate $100 billion in taxpayer savings from this negotiation process alone. In 2023, the ten drugs under negotiation accounted for $56.2 billion in Medicare expenditures, representing around 20% of the total costs for Medicare Part D drugs. Out-of-pocket (OOP) costs for these drugs totaled $3.9 billion in 2023, and if the negotiated prices had been in effect, Medicare patients could have saved approximately $1.5 billion in OOP expenses.
Using data from GlobalData’s Price Intelligence (POLI) database, the negotiated Medicare price for Bristol Myers Squibb’s Eliquis (apixaban) was compared to prices in the five major European markets (5EU: France, Germany, Italy, Spain, and the UK) and the U.S. Big 4 price, which is the maximum price that manufacturers can charge federal agencies like the Department of Veterans Affairs and the Department of Defense.
Biden Administration: Despite Significant Medicare Price Reductions
Despite the significant reductions achieved through Medicare negotiations, the prices in the 5EU for these drugs remain lower than the agreed Medicare list prices. For instance, Eliquis is still 86%–89% cheaper in these European markets compared to its Medicare-negotiated price. In the U.S., the Big 4 price of Eliquis, which is 23.00% of its wholesale acquisition cost (WAC), remains higher than the Medicare-negotiated prices for the ten drugs.
The first round of Medicare drug price negotiations under the Inflation Reduction Act represents a significant step towards reducing healthcare costs for millions of Americans. While the exact impact of these savings will depend on various factors, including existing rebates and discounts, the projected $6 billion in savings by 2026 underscores the potential of government-led price negotiations in controlling drug costs. As the negotiated prices take effect in 2026, Medicare beneficiaries can expect to see considerable reductions in out-of-pocket expenses, marking a new era in affordable healthcare.
Resource: Pharmaceutical Technology, August 29, 2024
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