Background

The IRA, which was signed into law in August 2022, includes several drug pricing provisions. Under the law, Medicare can negotiate certain prescription drug prices with pharmaceutical companies. This provision will initially apply to 10 drugs starting in 2026 and expand to 20 drugs in 2029.

In August 2023, CMS announced the first 10 drugs that will be eligible for price negotiations under the IRA:

• Eliquis, used for preventing strokes and blood clots, made by Bristol Myers Squibb and Pfizer
• Enbrel, used for arthritis and other autoimmune conditions, made by Amgen
• Entresto, used for heart failure, made by Novartis
• Farxiga, used for chronic kidney disease, made by AstraZeneca
•  Fiasp and NovoLog insulin products, used for diabetes, made by Novo Nordisk
• Imbruvica, used for blood cancers, made by AbbVie and Johnson & Johnson
• Januvia, used for diabetes, made by Merck
•  Jardiance, used for diabetes and heart failure, made by Boehringer Ingelheim and Eli Lilly
• Stelara, used for Crohn's disease, made by Johnson & Johnson
•  Xarelto, used for preventing strokes and blood clots, made by Johnson & Johnson

According to HHS, the selected drugs accounted for $50.5 billion in total Medicare Part D gross covered prescription drug costs, or roughly 20% of total Part D gross covered prescription drug costs, between June 1, 2022, and May 31, 2023, which is the period designated by the IRA for price negotiations.

An Advisory Board analysis also found that if CMS had negotiated down the prices of the first 10 selected drugs over the last year, Medicare could have saved roughly between $20 billion and $30 billion, or around 10% of total Part D drug costs.

HHS reveals new prices for 10 drugs

On Wednesday, HHS revealed the results of price negotiations for the 10 drugs. In a press call ahead of the announcement, HHS Secretary Xavier Becerra said that if the negotiated prices had been in effect in 2023, Medicare would have saved $6 billion and beneficiaries would have saved $1.5 billion in out-of-pocket costs.

"I had the privilege to work closely with our HHS team and oversee the negotiations," Becerra said. "The negotiations were comprehensive. They were intense. It took both sides to reach a good deal."

How much a company spent developing the drug, production and distribution costs, the amount of taxpayer support for the drug's development, the company's sales of the drug, and information regarding alternative medications were all considered for the negotiated prices.

Compared to the 2023 list prices for a 30-day supply, the newly negotiated prices are:

• Eliquis: $231, down from $521, representing a 56% discount
• Enbrel: $2,355, down from $7,106, representing a 67% discount
• Entresto: $295, down from $628, representing a 53% discount
• Farxiga: $178.50, down from $556, representing a 68% discount
• Fiasp and NovoLog: $119, down from a range of $495, representing a 76% discount
• Imbruvica: $9,319, down from $14,934, representing a 38% discount
• Januvia: $113, down from $527, representing a 79% discount
• Jardiance: $197, down from $573, representing a 66% discount
• Stelara: $4,695, down from $13,836, representing a 66% discount
• Xarelto: $197, down from $517, representing a 62% discount

The negotiated prices will go into effect in January 2026.

Drug price negotiations could save the federal government $98.5 billion over a decade, according to the Congressional Budget Office (CBO). Medicare will start negotiating the next set of medications early next year.

Reaction

President Joe Biden in a statement said that the new prices are "a relief for the millions of seniors that take these drugs to treat everything from heart failure, blood clots, diabetes, arthritis, Crohn's disease, and more — and it's a relief for American taxpayers."

Vice President Kamala Harris said the announcement "will be lifechanging for so many of our loved ones across the nation, and we are not stopping here," noting that more prescription drugs will be selected for future negotiations.

According to Stacie Dusetzina, a health policy professor at Vanderbilt University, it's important to note that the negotiated prices don't represent a direct comparison between the new prices and what Medicare and enrollees would have originally paid, as the list price is the full retail price of a medication and doesn't include any discounts or rebates a drug company may have offered.

However, Dusetzina said these are still "pretty big discounts."

"I think that it shows that they're taking these negotiations very seriously and they're trying to get much lower prices," she added.

Drugmakers have pushed back against the negotiations, filing multiple lawsuits to prevent them from going into effect and arguing they will hamper drug innovation. CBO estimated that the IRA will prevent 13 new drugs from coming to the market over the next 30 years out of the 1,300 expected to come to the market during that time.

Drugmakers have also argued that the process isn't a real negotiation, referring to it instead as price setting, since Medicare ultimately decides the price it will pay after offers are exchanged.

"The administration is using the IRA's price-setting scheme to drive political headlines, but patients will be disappointed when they find out what it means for them. There are no assurances patients will see lower out-of-pocket costs because the law did nothing to rein in abuses by insurance companies and PBMs who ultimately decide what medicines are covered and what patients pay at the pharmacy," said Steve Ubl, CEO of the Pharmaceutical Research and Manufacturers of America, a drug industry trade group.

Similarly, Novo Nordisk called the negotiations a "price-setting process" and said the company has "serious concerns about how the law is being implemented," including HHS' decision to group two of its products together.

"In the short-term this might be manageable on our first set of drugs," said Novartis CEO Vas Narasimhan. "In the long run, this policy is really not good for innovation, good for patients in the United States." (Lupkin/Khalid, "Shots," NPR, 8/15; Zhang, STAT+ [subscription required], 8/15; Hopkins, Wall Street Journal, 8/15; Goldman, Axios, 8/15; Constantino, CNBC, 8/15; Weiland/Robbins, New York Times, 8/15; Lovelace Jr., NBC News, 8/15)