Activists protest the value of prescription drug costs in front of the U.S. Department of Health and Human Services (HHS) constructing on October 06, 2022 in Washington, DC.
Anna Moneymaker | Getty Images
U.S. patients and drugmakers will get a primary glimpse of how much Medicare can negotiate down drug prices in 2024, setting the precedent for a controversial process that will affect what seniors pay for dozens of medicines by the top of the last decade.
It is also a pivotal 12 months for the lawsuits that drugmakers – including Merck, Johnson & Johnson and Bristol Myers Squibb – have filed against the value talks. Decisions could come down in among the cases next 12 months, which could eventually escalate the problem to the Supreme Court.
President Joe Biden’s Inflation Reduction Act, which passed in a party-line vote last 12 months, gave Medicare the authority to directly hash out drug prices with manufacturers for the primary time within the federal program’s nearly 60-year history.
Medicare is negotiating prices for the primary round of 10 prescribed drugs in a bid to make those costly treatments more cost-effective for older Americans. By the autumn, the federal government will publish the agreed-upon prices for those medications, which is able to go into effect in 2026.
Why 2024 will set a precedent for price talks
The outcomes of the talks may have huge stakes for the pharmaceutical industry, which views the method as a threat to its revenue growth, profits and drug innovation.
The ultimate prices will determine how much revenue the businesses that make the drugs can expect to lose in just a few years. The figures may also give other drugmakers an idea of how much their sales may very well be affected if their medications are chosen for future rounds of negotiations.
But the ultimate agreed-upon prices are also significant for patients, who will get a primary take a look at how much money the talks will save them at a time when many older people increasingly struggle to afford medications.
“We’ll see how much that program is in a position to negotiate and it will give patients who’re already on [the drugs] an idea of the savings they are going to see,” said Leigh Purvis, a prescription drug policy principal on the AARP Public Policy Institute.
AARP is the influential lobby group that represents people older than 50. The organization has advocated for Medicare’s recent negotiation powers.
A pharmacist holds a bottle of the drug Eliquis, made by Pfizer Pharmaceuticals, at a pharmacy in Provo, Utah, January 9, 2020.
George Frey | Reuters
The drugs subject to the negotiations are among the many top 50 with the best spending for Medicare Part D, which covers prescription medications that seniors fill at retail pharmacies.
In 2022, 9 million seniors spent $3.4 billion out of pocket on the ten drugs, and a few paid greater than $6,000 per 12 months for just considered one of the medications on the list, in response to the Biden administration.
Nearly 10% of Medicare enrollees ages 65 and older, and 20% of those under 65, report challenges in affording drugs, the administration said in August.
Medicare covers roughly 66 million people within the U.S., and 50.5 million patients are currently enrolled in Part D plans, in response to health policy research organization KFF.
What the negotiation timeline looks like
The Biden administration officially kicked off the negotiation process in August when it named the primary round of medicines subject to the value talks. They include diabetes drugs from Merck and AstraZeneca, and blood thinners from Bristol Myers Squibb and Johnson & Johnson.
Two months later, all firms that make the drugs on the list signed agreements to take part in the negotiations, even after most of them sued the Biden administration to halt the talks.
However the actual negotiation period will begin on Feb. 1, when the Centers for Medicare & Medicaid Services will make initial “maximum fair price” offers for every of the ten drugs chosen. CMS is required to incorporate a justification for why the value is fair based on several aspects.
That features U.S. sales volume data, a manufacturer’s research and development costs, federal financial support for the drug’s development, data on pending or approved patent applications and exclusivities, or a time period when a brand-name drug is shielded from generic competition.
First 10 drugs subject to cost negotiations
- Eliquis, made by Bristol Myers Squibb, is used to forestall blood clotting, to scale back the danger of stroke.
- Jardiance, made by Boehringer Ingelheim, is used to lower blood sugar for individuals with Type 2 diabetes.
- Xarelto, made by Johnson & Johnson, is used to forestall blood clotting, to scale back the danger of stroke.
- Januvia, made by Merck, is used to lower blood sugar for individuals with Type 2 diabetes.
- Farxiga, made by AstraZeneca, is used to treat Type 2 diabetes.
- Entresto, made by Novartis, is used to treat certain sorts of heart failure.
- Enbrel, made by Amgen, is used to treat rheumatoid arthritis.
- Imbruvica, made by AbbVie, is used to treat various kinds of blood cancers.
- Stelara, made by Janssen, is used to treat Crohn’s disease.
- Fiasp and NovoLog, insulins made by Novo Nordisk.
After receiving the offers, firms have a month to simply accept it or counter it. Negotiations end when CMS and drugmakers reach an agreement.
If CMS rejects the counteroffer for a drug, the agency can arrange up to 3 meetings with the drugmaker to debate other price options.
CMS has to make final price offers to the manufacturers by July 15, and people firms have two weeks to simply accept or reject them. If drugmakers fail to agree on a price with Medicare by Aug. 1, they might be forced to pay an excise tax of as much as 95% of a medicine’s U.S. sales or pull all of their drug products from the Medicare and Medicaid markets.
CMS will publish agreed-upon prices on Sept. 1.
After the initial round of talks, CMS can negotiate prices for an additional 15 drugs that can go into effect in 2027 and an extra 15 that can go into effect in 2028. The number rises to twenty negotiated medications a 12 months starting in 2029.
CMS will only select Medicare Part D drugs for the medicines covered by the primary two years of negotiations. It can add more specialized drugs covered by Medicare Part B, that are typically administered by doctors, in 2028.
How drugmaker lawsuits could develop
The legal fight between drugmakers and the Biden administration could also see crucial developments in 2024, as cases may start moving to appeals courts.
Merck, Johnson & Johnson, Bristol Myers Squibb, AstraZeneca, Novo Nordisk, Novartis and Boehringer Ingelheim are all suing to halt the negotiation process. Each of the businesses has one drug chosen for negotiations.
The industry’s biggest lobbying group, PhRMA, and the nation’s largest business lobbying organization, the U.S. Chamber of Commerce, have filed their very own lawsuits. A federal judge in September denied a preliminary injunction sought by the Chamber of Commerce, which aimed to dam the value talks.
All the drugmakers and each trade groups have asked for summary judgments of their cases against the Biden administration, arguing the value talks are unconstitutional and have to be struck down.
Decisions in most of those cases could occur in the following six months, in response to Kelly Bagby, vice chairman of litigation on the AARP Foundation.
She said that no matter what the choices are, they are going to likely get appealed to federal appellate courts across the U.S. The pharmaceutical industry could also be attempting to obtain conflicting rulings from those appeals courts, which could fast-track the problem to the Supreme Court, Bagby added.
“The Supreme Court would feel obliged to take the case and evaluate the constitutionality of the Inflation Reduction Act itself,” Bagby said, noting that the problem may not reach the nation’s highest court until 2025.
Some drugmakers, corresponding to Merck, have already confirmed they wish to bring their legal battle to the Supreme Court.
Drugmakers within the lawsuits argue the negotiations would force them to sell their medicines at huge discounts, below market rates. They assert that this violates the Fifth Amendment, which requires the federal government to pay reasonable compensation for personal property taken for public use.