US Gov’t Takes Next Step in Drug Pricing Reform
The US government is sending initial offers to participating bio/pharmaceutical companies of the first 10 Rx drugs selected for negotiation in the first cycle of the Medicare Drug Price Negotiation Program. Which companies & products are affected?
Next step in the drug-pricing negotiation program.
This week (February 1, 2024), the US Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), announced it is sending initial offers to the participating drug companies of the first 10 prescription drugs selected for negotiation in the first cycle of the Medicare Drug Price Negotiation Program.
The Inflation Reduction Act, a major climate, tax, and healthcare bill that was signed into law in 2022, included measures to address the cost of prescription drugs in the US. A key provision under the new law is that for the first time ever, the US government, through the Department of Health and Human Services (HHS), was authorized and required to negotiate prices for certain prescription drugs under Medicare, the US federal health insurance program for people 65 or older. The process for implementing the new law began last year (2023), and the first negotiated prices are set go into effect in 2026.
The drug-pricing measures apply to select drugs under Medicare Part D, which covers most outpatient prescription drugs from pharmacies and other pharmacy providers, and Medicare Part B, which applies to prescription drugs administered in a physician’s office or clinical/hospital outpatient setting. The Medicare Drug Price Negotiation Program limits the number of drugs to be selected for price negotiations. Under the drug-price negotiation program, the HHS Secretary is authorized and required to select a specified number of drugs from a list of 50 “negotiation-eligible drugs” with the highest Medicare Part D spending and from a list of 50 “negotiation-eligible drugs” with the highest Medicare Part B spending over a given 12-month period. It would limit the number of eligible drugs for negotiations to 10 Medicare Part D drugs in 2026, 15 Medicare Part D drugs in 2027, 15 Medicare Part B and D drugs in 2028, and 20 Medicare Part B and D drugs in 2029 and thereafter.
In addition, the program also limits the type of drugs eligible to be negotiated under the drug-pricing plan. For example, the plan applies only to “high-cost” drugs defined by levels of Medicare spending, “older” drugs, defined on the basis of the number of years from when a drug was approved by the US Food and Drug Administration (FDA), and drugs without generic-drug and biosimilar competition.
The drug-pricing negotiation process
HHS had nnounced the 10 initial drugs selected for the first cycle of Medicare drug price negotiation on August 29, 2023. On October 3, HHS announced that the drug companies of all 10 selected drugs agreed to participate in negotiations with Medicare. Now those companies will receive the initial offer as part of the negotiation process. Negotiations will continue over the next several months, with negotiations ending by August 1, 2024. If a maximum fair price is agreed upon by the participating drug company and Medicare, those new prices will take effect in Medicare beginning in 2026. Over the next four years, Medicare will negotiate prices for up to 60 drugs covered under Medicare Part D and Part B, and up to an additional 20 drugs every year after that.
First set of drugs under price negotiation
Now, the CMS announced it is sending initial offers to the participating drug companies of the first 10 prescription drugs selected for negotiation in the first cycle of the Medicare Drug Price Negotiation Program. The products and companies are: AbbVie’s/Johnson & Johnson’s Imbruvica for treating certain blood cancers; Amgen’s Enbrel for rheumatoid arthritis, psoriasis, and psoriatic arthritis; AstraZeneca’s Farxiga for treating Type 2 diabetes, heart failure and chronic kidney diseas; Boehringer Ingelheim’s/Eli Lilly’s Jardiance for treating Type II diabetes and heart failure; Bristol Myers Squibb’s / Pfizer’s Eliquis, an anticoagulant; Johnson & Johnson’s Stelara for treating psoriasis, psoriatic arthritis, Crohn’s disease, and ulcerative colitis; Johnson & Johnson’s Xarelto for the prevention and treatment of blood clots and reducing risks with patients with coronary or peripheral artery disease; Merck & Co.’s Januvia for treating Type 2 diabetes, heart failure, and chronic kidney disease; and Novartis’ Entresto for treating heart failure; Novo Nordisk’s Fiasp, Fiasp FlexTouch, Fiasp PenFill and NovoLog, NovoLog FlexPen, and NovoLog PenFill.
Industry continues in its opposition
In addition, the HHS’s Office of the Assistant Secretary for Planning and Evaluation has released several reports detailing the cost comparison of prescription drugs in the US and that of drugs in other Organization for Economic Co-operation and Development (OECD) countries.
The Pharmaceutical Research and Manufacturers of America (PhRMA), which represents innovator drug companies, has been critical of the drug-pricing reforms over a lack of transparency and accountability in the drug-price negotiation pricing and the overall dampening effect of drug-pricing measures on product innovation. Last year (2023), PhRMA, the National Infusion Center Association, and the Global Colon Cancer Association, filed complaint in a federal district court in Texas asserting the price-setting provisions in the Inflation Reduction Act are unconstitutional. PhRMA’s lawsuit follows separate lawsuits also filed in 2024 by the US Chamber of Commerce, Merck & Co., and Bristol Myers Squibb, with each of those parties filing their own lawsuits in federal district courts against the US government on the grounds that the price-setting measures under the Inflation Reduction Act are unconstitutional.
PhRMA again reiterated its opposition to the drug-pricing measures. “This continues to be an exercise to win political points on the campaign trail rather than do what’s in the best interest of patients,” said Alex Schriver, PhRMA’s Senior Vice President of Public Affairs in a February 1, 2024, statement. “Government bureaucrats are operating behind closed doors to set medicine prices without disclosing for months how they arrived at the price or how much patient and provider input was used. This lack of transparency and unchecked authority will have lasting consequences for patients long after this administration is gone.”