In a significant turn of events, the Biden administration announced a stupendous deal with the pharmaceutical companies for a price cut on the top ten medications that are extremely expensive and provided under Medicare’s coverage. This is the first time that the federal government has negotiated prices with manufacturers of drugs and it is to reduce the burden experienced by older Americans who find it challenging to pay for life-saving drugs. The price reductions negotiated will come into effect in 2026, and they represent significant cutbacks especially for those in fixed incomes.
For Medicare beneficiaries, this change could mean significant savings, especially for individuals prescribed high-cost drugs for conditions like heart disease, diabetes, and rheumatoid arthritis. A few examples illustrate the scale of these reductions. For instance, the blood thinner Eliquis, produced by Bristol Myers Squibb and Pfizer, will drop from a list price of $521 for a 30-day supply to a negotiated price of $231. Similarly, the price for Xarelto, another blood thinner from Johnson & Johnson, will be reduced to $197 from $517. Diabetes treatments such as Januvia from Merck and Jardiance from Boehringer Ingelheim and Eli Lilly will also see notable price reductions, from over $500 to prices below $200. These adjusted prices, compared to 2023 list prices, don’t capture any existing discounts or rebates but do highlight the effort to make essential drugs more affordable.
The negotiations, launched under the Inflation Reduction Act, represent a long-overdue reform. Historically, the federal government has not been able to directly negotiate drug prices under Medicare, but these new talks are a step toward changing that. According to the White House, these adjustments are expected to save Medicare enrollees an estimated $1.5 billion in out-of-pocket costs during the first year alone. Health and Human Services Secretary Xavier Becerra described the process as “intense,” reflecting the many rounds of discussions between federal officials and drug companies. Xavier Becerra and his team worked closely with the Department of Health and Human Services to navigate these negotiations and reach agreements that work for both sides.
Significant savings for seniors and future implications
The reduced drug prices are expected to yield financial gains that are likely to be felt by a majority of the population, taking into consideration that Medicare caters for over 65 million individuals. Also, the agreement is expected to save the Medicare program itself approximately $6 billion in the first year of implementation, thereby relieving the pressure on Medicare’s budget without increasing the burden on healthcare costs for the elderly. In addition, other provisions of the Inflation Reduction Act reinforce these savings with measures such as capping out-of-pocket spending on insulin at $35 a month, and an annual limit on total prescription spending.
Stacie Dusetzina, a professor of health policy at Vanderbilt University, said that these discounts are very significant, which shows that the government has made it its mission to bring down prices and improve access to health care. She noted that it is encouraging that the agreement is alive with all the 10 drugmakers targeted — and nobody has chosen to opt out of Medicare — this is encouraging. This provision is true in relation to the ongoing negotiations, and moreover, the drug manufacturers are able to appeal against this regulation by other lawful means. Nevertheless, to this day, the efforts towards the prevention of the law’s implementation have borne no fruit.
The other notable aspect is that the negotiations involve only drugs provided in the context of Medicare Part D, which primarily consists of drugs taken outside the hospital. Perhaps at a later date, those discussions could even be applied to Medicare Part B, which includes medications given within the medical office such as those used for chemotherapy. According to Neera Tanden, a domestic policy aide at the White House, these cuts are significant because those on Medicare, including many seniors, will soon have reduced prices for some of the highest-cost medications including those used for heart disease, cancer, diabetes, and more.
Such a transformative approach speaks volumes about the commitment to lower costs of healthcare, especially prescription drugs, for millions of people. Although the reduced prices will not be in effect until 2026, the new pricing model shows that the current administration cares about ensuring access to prescription drugs for patients rather than focusing on the profits of the pharmaceutical companies.
