Explainer: Medicare Negotiations for Drug Prices
On Tuesday, August 29th, the Biden administration announced the first 10 drugs that Medicare will start negotiating the prices of with manufacturers as part of the Inflation Reduction Act. The Act allowed Medicare to negotiate prices for drugs to lower their costs. These negotiations with drug manufacturers will significantly lower prescription drug costs for Indian and South Asian Medicare recipients.
Eliquis (Bristol-Myers Squibb): used to prevent blood clotting and reduce the risk of stroke.
Jardiance (Boehringer Ingelheim): used to lower blood sugar for people with Type 2 Diabetes.
Xarelto (Johnson & Johnson): used to prevent blood clotting and reduce the risk of stroke.
Januvia (Merck): used to lower blood sugar for people with Type 2 Diabetes.
Farxiga (AstraZeneca): used to treat Type 2 Diabetes.
Entresto (Novartis): used to treat certain types of heart failure,
Enbrel (Amgen): used to treat rheumatoid arthritis.
Imbruvica (AbbVie): used to treat different types of blood cancers.
Stelara (Janssen): used to treat Crohn’s disease.
Fiasp and NovoLog, types of insulin produced by Novo Nordisk used to help patients with insulin issues like diabetes.
The drugs account for $50.5 billion (20%) of Medicare Part D prescription drug costs from June 1, 2022, to May 31, 2023, and are among the top 50 drugs with the highest spending costs for Part D plans. In 2022, 9 million older Americans spent $3.4 billion for these 10 drugs out of pocket.
Drug manufacturers must sign an agreement saying they are willing to negotiate the price by October 1, 2023. The Center for Medicare and Medicaid Services will then send an offer for the negotiated price in February 2024, wherein manufacturers can either agree or issue a counteroffer. The negotiations should end in August 2024, and the agreed-upon prices will go into effect in January 2026. If a manufacturer declines to negotiate, it must either pay a tax of up to 95% of the drug’s US sales or pull its products from Medicare and Medicaid services.
After the initial talks, the Center will have a chance to negotiate the prices for additional drugs.
Several of the drug manufacturers, including Johnson & Johnson and Merck, have started legal challenges to stop the negotiating process. PhRMA, the pharmaceutical industry’s biggest lobbying group, and the U.S. Chamber of Commerce have filed their lawsuits, too, arguing that negotiating the prices is unconstitutional.
South Asians have a 23% higher prevalence of diabetes than other communities. South Asians also make up 60% of all heart diseases globally despite making up only 25% of the population. Negotiating the price of drugs will help Medicare recipients lower their drug costs and afford lifesaving medication.
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References and Further Reading:
Annika Kim Constantino. CNBC. Biden administration unveils first 10 drugs subject to Medicare price negotiations. 29 August 2023.
Alka M. Kanaya. American Diabetes Association. Understanding the High Prevalence of Diabetes in U.S. South Asians Compared With Four Racial/Ethnic Groups: The MASALA and MESA Studies. 10 May 2024.
Desifacts.org. Explainer: Addressing Disproportionate Risks of Heart Disease in South Asian Communities. 27 July 2023.
