Medicare, the health insurance program for people over 65 years old, said it will start negotiating prices on 10 drugs, part of its mandate under the Inflation Reduction Act to lower prescription prices for older Americans.
The first drugs under price negotiations include diabetes medication Jardiance, insulin such as the NovoLog FlexPen and the heart medication Entresto, according to a statement by the U.S. Department of Health and Human Services.
The negotiations mark the first time Medicare has been able to haggle over drug prices for its 65 million enrollees. They come at a time when 1 in 5 seniors say they are skipping doses because of the cost of their medications. While the negotiations are expected to lower drug costs for Medicare enrollees, the effort faces litigation from drugmakers and heavy criticism from Republican lawmakers.
AARP, the advocacy group for older Americans, called the negotiations "monumental."
"The No. 1 reason seniors skip or ration their prescriptions is because they can't afford them. This must stop," AARP executive vice president Nancy LeaMond said in a statement. "Allowing Medicare to negotiate prices for these first 10 drugs will finally bring much-needed access and relief to American families, particularly older adults."
"This is a ground-breaking change for Medicare enrollees," Mariana Socal, an associate scientist at Johns Hopkins University, told CBS MoneyWatch. "For the very first time, they will actually know how much the drugs that they take actually cost."
She added, "This is something that nobody really knows — it's not only Medicare enrollees who don't know, but any person in the United States doesn't know how much their drugs really cost."
The 10 drugs under negotiation
Medicare's first drug price negotiations will focus on insulin, blood thinners and more. The drugs are:
- Fiasp; Fiasp FlexTouch; Fiasp PenFill; NovoLog; NovoLog FlexPen; NovoLog PenFill
Why were these drugs picked?
The Biden administration said that it focused on drugs that were covered by Part D, Medicare's primary coverage plan for prescription medications, which are among costliest drugs for the health insurance program.
"These drugs represent a serious budget impact for the Medicare program," Socal of Johns Hopkins said. "They are really the heavy heaters for the program."
It also picked drugs without competition that have been on the market for at least 7 years, while excluding some types of medications, such as some orphan drugs, which are aimed at patients suffering from rare diseases, officials said on a Tuesday conference call.
The list also includes several versions of Novo Nordisk's Fiasp, a fast-acting insulin taken around meals, although the Inflation Reduction Act already caps Medicare patient out-of-pocket costs for insulin at $35 a month. An administration official said Tuesday that that upper limit will hold but there could be further changes in those costs.
Overall, the 10 drugs treat diseases that are very common among its enrollees, such as blood clots, diabetes, heart disease and chronic kidney disease, officials said.
How much could seniors save on medications?
According to the Biden administration, seniors spent $3.4 billion in out-of-pocket costs for these medications in 2022. In all, Medicare spent about $50.5 billion on these 10 medications, or 20% of its Part D prescription drug costs, between June 1, 2022 and May 31, 2023, the Biden adminsitration said.
The negotiations, as well as other pricing mechanisms authorized by the Inflation Reduction Act, could save taxpayers $160 billion by cutting Medicare's spending on drugs, President Joe Biden said in a statement released Tuesday.
"When implemented, prices on negotiated drugs will decrease for up to 9 million seniors," Biden added.
Part D enrollees are expected to save about $400 a year on drug costs in 2025 due to several other IRA provisions, such as a $2,000 cap on out-of-pocket spending, officials said. However, that estimate doesn't include the impact of negotiations on drug prices, they added.
When would lower prices become effective?
The agreed-upon negotiated prices would be published by Sept. 1, 2024.
But the negotiated prices for these drugs wouldn't go into effect until Jan. 1, 2026, the Biden administration said.
Will Medicare negotiate prices on additional drugs?
Yes, the Biden administration said it will select up to 15 more drugs covered under part D for 2027, and another 15 drugs for 2028, with the latter including drugs covered under both Part B and Part D.
In subsequent years, 20 additional drugs will be picked for negotiations annually.
Part B covers doctor's visits and some outpatient drugs that must be administered in a medical office. Part D is the broader coverage for prescriptions.
What is the status of the drug industry's lawsuits?
The plan already faces eight lawsuits, including complaints filed by drugmakers Merck and Bristol-Myers Squibb, and a key lobbying group — the Pharmaceutical Research and Manufacturers of America, or PhRMA.
PhRMA said in a federal court complaint filed earlier this year that the act forces drugmakers to agree to a "government-dictated price" under the threat of a heavy tax and gives too much price-setting authority to the U.S. Department of Health and Human Services.
"[T]he biggest risk that would delay or prevent implementation of the Medicare drug price negotiation program, as currently proposed, remains litigation," noted Heights Securities in a Tuesday research report.
The Biden administration on Tuesday said that nothing in the Constitution prohibits Medicare from negotiating drug prices.
Even so, given the lawsuits, which have been filed across seven U.S. District Court districts, "it is very likely that the groups will receive conflicting rulings that will put the legal challenges on a fast track to the Supreme Court," Heights Securities predicted.
Does this have an impact on people outside of Medicare?
Long-term, the negotiations may also help younger Americans by bringing more transparency to drug pricing, Socal told CBS MoneyWatch.
"Initially, the movement will start with these 10 drugs," she said. "Patients who are not part of Medicare will say, for example, 'Wait a minute, I'm paying $200 out of pocket for this drug and Medicare announced that the Medicare price will be $100. How can this be possible?'"
With reporting by the Associated Press.
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