A key element of the Inflation Reduction Act (IRA) which was passed last year was Medicare gaining the authority to negotiate the price of some prescription drugs. New prices for the first 10 drugs will take effect in 2026 with additional drugs added to the list in coming years. The list of the first 10 drugs was released on Tuesday, Aug. 28. These 10 drugs cost more than $50 Billion to Medicare and make up 20% of Medicare’s pharmacy drug costs over a 1-year period:
1. Eliquis, for preventing strokes and blood clots, from Bristol Myers Squibb and Pfizer
2. Jardiance, for diabetes and heart failure, from Boehringer Ingelheim and Eli Lilly
3. Xarelto, for preventing strokes and blood clots, from Johnson & Johnson
4. Januvia, for diabetes, from Merck
5. Farxiga, for chronic kidney disease, from AstraZeneca
6. Entresto, for heart failure, from Novartis
7. Enbrel, for arthritis and other autoimmune conditions, from Amgen
8. Imbruvica, for blood cancers, from AbbVie and Johnson & Johnson
9. Stelara, for Crohn’s disease, from Johnson & Johnson
10. Fiasp and NovoLog insulin products, for diabetes, from Novo Nordisk
Drug manufacturers have until Oct. 1 to decide whether they will participate in negotiations with the government. Companies that decide not to negotiate must either pay a large excise tax or withdraw all their products from both Medicare and Medicaid.
Not surprisingly, a group of six manufacturers (Astellas Pharma, AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb, Johnson & Johnson and Merck) have filed suits to block the Medicare price negotiation program. Also not surprisingly, Congressional Republicans continue to oppose the price negotiation on the grounds that it is equivalent to imposing government price controls.
The U.S. Chamber of Commerce also filed suit claiming that price negotiation provisions in the IRA “violate fundamental protections for free enterprise enshrined in our Constitution.”
Likewise, the main drug industry trade group PhRMA, has filed suit claiming that the IRA’s excise tax, imposed on any drug manufacturer that doesn’t comply with Medicare’s price-setting negotiations, violates the Eighth Amendment’s Excessive Fines Clause as well as violates the Fifth Amendment’s prohibition on the taking of private property for public use without just compensation.
It will be interesting to see how the suits play out and how this issue factors into debates over healthcare as part of the upcoming presidential election year. It will also be interesting to see how companies respond if the price negotiations move forward. Will any companies “call the government’s bluff” and withdraw their drug from Medicare and Medicaid coverage impacting millions of Americans? Will companies choose to pay the excise tax, which ultimately doesn’t lower the cost of the drug for patients?
All the companies on the list have extensive drug portfolios. What is to prevent companies from simply raising prices on their other drugs to the maximum extent possible to cover the cost of the reduced prices or the excise tax? The IRA does provide some additional protection for this through the requirement that drug manufacturers pay a rebate to the federal government if prices for single-source drugs and biologicals covered under Medicare Part B and nearly all covered drugs under Part D increase faster than the rate of inflation. Will this simply be a case of savings in one area reappearing as price increases in another?
Ultimately the goal of this program is to reduce prescription drug prices and provide relief to patients on their “out-of-pocket” drug expenses. Hospital pharmacy programs should be paying attention to this and considering the impact of these price reductions on hospital-based retail and specialty pharmacy programs. Also, pharmacies should be prepared to explain this program to patients who are looking for price reductions now.
As always, Visante is at the ready to provide support as you navigate the impact of these changes on your organization. Contact us today!