price negotiations of medicare

Medicare Price Negotiations Target Drug Costs: Industry Reacts

The Biden Administration unveiled a significant step towards curbing rising pharmaceutical costs today by announcing the inaugural list of drugs for which Medicare will engage in price negotiations. This action, slated to take effect in 2026, is a pivotal development under the Inflation Reduction Act (IRA) aimed at alleviating the financial burden on American families. The list comprises ten drugs that have been identified as contributing to high Medicare expenditure, encompassing medications for conditions such as diabetes, heart failure, autoimmune diseases, and cancer.

The medicines earmarked for negotiation include well-known brands such as Eliquis, a blood thinner from Bristol Myers Squibb; Jardiance, a diabetes treatment developed by Boehringer Ingelheim and Eli Lilly; Xarelto, a blood thinner produced by Bayer; Januvia, a diabetes therapy crafted by Merck; Farxiga, another diabetes solution from AstraZeneca; Entresto, a heart failure treatment innovated by Novartis; Enbrel, an autoimmune disease combatant manufactured by Amgen; Imbruvica, a cancer-fighting drug collaborated on by Johnson & Johnson and AbbVie; Stelara, a remedy for Crohn’s disease, also from Johnson & Johnson; and finally, Fiasp and Novolog, insulins formulated by Novo Nordisk.

Thus far, this announcement has not significantly impacted the stock values of prominent pharmaceutical corporations like Merck, Johnson & Johnson, Pfizer, and Bristol Myers Squibb, with their shares maintaining stability during pre-trading on Tuesday.

A White House official, speaking on background, asserted, “Despite Big Pharma spending nearly $400 million in lobbying efforts last year alone, the Biden-Harris Administration will continue to fight for lower costs for American families and to make sure no American is denied essential care simply because of cost.”

In anticipation of this list targeting their drugs, half of the affected companies have initiated legal actions against the U.S. Health Department (HHS) and Centers for Medicare and Medicaid Services (CMS), as well as their respective leaders. Notably, Eliquis and Imbruvica are among the drugs that pharmaceutical giants Pfizer, Bristol Myers Squibb, and Johnson & Johnson expect to lose patent protection for in the coming years. The timeline specified by the IRA allows these medications to be subject to negotiation between 9 and 13 years after the initial patent filing, a provision that has sparked vigorous debate within the pharmaceutical industry. Companies argue that a substantial portion of the patent period is devoted to research and development, but they have still managed to extend patent lifespans beyond their initial durations.

Selected from an extensive roster of 7,500 candidates, the chosen drugs, encompassed under Part D, represent a significant portion of recent Medicare spending. According to the HHS, “These selected drugs accounted for $50.5 billion in total Part D gross covered prescription drug costs, or about 20%, of total Part D gross covered prescription drug costs between June 1, 2022, and May 31, 2023.”

Despite predictions of potential inclusion based on expenditure, Novo Nordisk’s Ozempic did not make the initial list. Nevertheless, the possibility remains for its inclusion in subsequent years. This diabetes treatment has recently contributed to increased healthcare costs for employers due to its emerging use as a weight loss solution.

The involved companies are slated to enter into negotiation processes starting in early 2024. CMS plans to release finalized negotiated rates in September of the following year.

Multiple lawsuits have already been initiated in various jurisdictions across the nation, indicating a potential fast-tracking of the issue to the U.S. Supreme Court. These legal challenges contest the constitutionality of the powers Medicare has in regards to price negotiations for high-cost single-source drugs, citing violations of the First Amendment, Fifth Amendment, and Eighth Amendment. The Biden Administration counters that nothing in the Constitution prohibits Medicare from regulating drug prices.

HHS Secretary Xavier Becerra stated, “For far too long, pharmaceutical companies have made record profits while American families were saddled with record prices and unable to afford life-saving prescription drugs. But thanks to the landmark Inflation Reduction Act, we are closer to reaching President Biden’s goal of increasing availability and lowering prescription drug costs for all Americans.”

Analysts predict that the lawsuits are unlikely to impede the negotiation process, set to commence in February. Biopharmaceutical manufacturers have been reassured that their exposure is immaterial, given that the affected profits constitute only a small fraction of global earnings.

While the IRA has garnered support from a significant 83% of Americans since its enactment nearly a year ago, concerns have been raised about potential negative repercussions on access to medications. Industry voices, such as AstraZeneca and the lobbying group PhRMA, argue that the cost-saving measures could lead to restricted drug access for seniors under Part D coverage. Amid the unfolding legal and healthcare landscape, uncertainties abound about the implications and consequences of this historic initiative, underscoring the intricate interplay of policy, pharmaceutical economics, and patient access in the realm of Medicare price negotiations.


Source: Yahoo Finance

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