Medicare drug price negotiations start with 1st 10 drugs, pharmaceutical industry lawsuits

The Biden administration on Tuesday unveiled the first 10 drugs subject to Medicare price negotiations, promising billions of dollars in savings for the federal government and the nine million Medicare beneficiaries taking at least one of the popular medications.

Medicare has been banned from directly negotiating lower drug prices since 2003, but the Inflation Reduction Act opened the door to some haggling. "This is a major step toward reducing drug spending," Stacie Dusetzina, a drug pricing expert at Vanderbilt University School of Medicine, told The Wall Street Journal.

The companies that make the 10 drugs have until Oct. 1 to inform the government if they will negotiate. If not, they face steep excise taxes and could be barred from Medicare and Medicaid. The drug negotiations would begin in 2024, and the price cuts would take effect in 2026. Medicare plans to add another 15 drugs to negotiate in 2027, 15 more in 2028, then up to 20 drugs a year after that.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

The government's savings will support an IRA program to cap out-of-pocket drug costs for Medicare beneficiaries at $2,000 a year, starting in 2025. A provision that capped insulin costs at $35 a month took effect earlier this year.

Six drugmakers, plus the U.S. Chamber of Commerce and the industry lobbying group PhARMA, have filed suit to block the federal drug negotiations, arguing they are unconstitutional. "Piggybacking on the pharmaceutical industry's strategy, Republicans are working to persuade Americans that the Biden plan will stifle innovation and lead to price controls," Politico reported, citing Republican strategists.

Recent Kaiser Family Foundation polling found that 89% of Democrats and 77% of Republicans favor the part of the IRA that allows Medicare to negotiate drug prices. If Republicans "want to run their campaigns based on keeping the profits of the drug companies high, welcome," Sen. Amy Klobuchar (D-Minn.) told Politico.