What to know about the Biden administration’s Medicare drug price negotiations

The Biden administration announced in August that 10 costly prescription drugs have been selected for price negotiations with drug companies. The long-awaited, if also contested, step is aimed at helping older and disabled Americans pay for the medicines they need in a high-priced marketplace.

The government, the pharmaceutical industry and patient advocacy groups have been embroiled in a long struggle over Medicare drug pricing, which became a significant part of last year’s Inflation Reduction Act. While the number of medications targeted and the start date for the price cuts fall short of the goals sought by some Democrats, President Biden and his aides celebrated the measure as a major policy win.

“There is no reason why Americans should be forced to pay more than any developed nation for life-saving prescriptions just to pad Big Pharma’s pockets,” Biden said in a statement.

Some pharmaceutical companies criticized the announcement. Johnson & Johnson, which makes three drugs on the list, said the policies put an artificial deadline on innovation and threatened intellectual property rights. Bristol Myers Squibb said its drug Eliquis was picked because of the sheer number of Medicare patients who take it, rather than the actual price charged.

Here’s what to know about the Medicare drug price negotiations:

Which drugs will be affected by price negotiations?

The administration announced 10 drugs that have been selected for a first round of price negotiation. The list includes Eliquis and Xarelto, which are both blood thinners; Jardiance, diabetes and heart-failure medication; Januvia, Farxiga and NovoLog, all of which treat diabetes, among other conditions; Enbrel, used to treat arthritis and psoriasis; Stelara, used to treat psoriasis, Crohn’s disease and ulcerative colitis; Entresto, a heart failure medication; and Imbruvica, a treatment for cancers of the blood.

What will the negotiation process look like?

Each manufacturer of the chosen drugs must tell the Centers for Medicare and Medicaid Services by Oct. 1 whether it is willing to participate in negotiations. CMS will accept data and information from the drug companies and from the public on each of the selected drugs no later than Oct. 2. CMS will then invite the drug companies to discuss their data submissions and will hold listening sessions with the public and patients who use the medications between Oct. 30 and Nov. 15.

Based on this input, CMS will send companies an initial offer for what federal rules call a “maximum fair price” for each drug, along with an explanation, no later than Feb. 1, 2024. Companies will have 30 days to accept the offer or make a counteroffer.

If CMS and a company cannot agree on a maximum fair price, CMS will invite the company to take part in up to three negotiation meetings before the negotiation period ends on Aug. 1, 2024. Negotiated prices are due to become available on Jan. 1, 2026.

How did the Biden administration select these 10 drugs?

CMS started with a list of nearly 7,500 prescription drugs that are covered through Medicare Part D, the program’s drug insurance. From there, CMS whittled down the list based on a number of criteria to select drugs that result in some of the highest costs to Medicare.

The agency picked only drugs that the Food and Drug Administration approved or licensed at least seven years ago. They also selected only biologic medicines, created using living cells or organisms, that were approved or licensed at least 11 years ago. All of the medications had to be ones that did not compete with a generic or a cheaper version.

CMS excluded certain “orphan” drugs, which treat a condition affecting less than 200,000 people.

How many Americans on Medicare use these medications?

The Department of Health and Human Services estimates that about 9 million seniors who were enrolled in Medicare’s prescription drug program used one or more of these 10 drugs in the past year, and they paid out-of-pocket costs totaling $3.4 billion.

What factors will be considered in the price negotiations?

Negotiations will take into account each drug’s clinical benefit, the extent to which it fills an unmet medical need and its impact on people who depend on Medicare. The cost associated with the drug’s research and development will also be considered.

What happens if a drugmaker will not negotiate or agree to a maximum fair price?

Companies that refuse to negotiate or accept a maximum fair price will face a substantial tax or will be forced to withdraw from Medicare and Medicaid, the largest public health insurance program for people with low incomes.