The White House is preparing to unveil the results of months of intense negotiations between the federal government and pharmaceutical companies: lower Medicare prices for 10 high-demand drugs.
Though specific prices have yet to be disclosed, Health and Human Services (HHS) Secretary Xavier Becerra has hinted at significant savings. According to Becerra, if these negotiated prices had been in effect for 2023, Medicare could have saved $6 billion, and beneficiaries could have saved $1.5 billion in out-of-pocket expenses, including copays at pharmacies.
Becerra emphasized the depth and intensity of the negotiations during a press call. “I had the privilege to work closely with our HHS team and oversee the negotiations,” he said. “The negotiations were comprehensive. They were intense. It took both sides to reach a good deal.”
These negotiations focused on 10 key drugs chosen last year under guidelines from the Inflation Reduction Act, which lifted Medicare’s 20-year prohibition on negotiating drug prices. The selected drugs include popular blood thinners like Eliquis and Xarelto, along with treatments for arthritis, cancer, diabetes, and heart failure.
The newly negotiated prices are set to take effect in January 2026.
Why Now?
Medicare Part D, which covers outpatient medications for roughly 50 million seniors, has historically lacked the power to negotiate drug prices. This changed with the Inflation Reduction Act, allowing Medicare to negotiate drug prices for the first time. Negotiations began in February and concluded on August 1.
While individual plans have always had some ability to negotiate lower prices, this marks the first instance where Medicare, as a whole, could leverage its buying power.
Senator Amy Klobuchar, a Minnesota Democrat, has long advocated for Medicare to negotiate drug prices and was instrumental in passing the legislation. Speaking alongside advocates on Wednesday, Klobuchar criticized pharmaceutical companies for using monopolistic tactics to keep prices high. “It is fine to make profits, but not to the extent that you’re actually hurting Americans’ health,” she said. “No one should be forced to choose between filling their prescriptions or filling their grocery carts.”
In 2022, these 10 drugs alone cost Medicare $50.5 billion, which amounted to about 20% of the program’s total drug spending. Beneficiaries spent $3.4 billion in out-of-pocket costs for these medicines.
Political Implications of Prescription Drug Costs
President Biden and Vice President Harris are expected to highlight the announcement during a joint appearance on Thursday in Maryland, where they will discuss the administration’s efforts to lower health care costs.
This event marks their first joint public appearance since Biden’s endorsement of Harris last month. Harris, who has been actively campaigning, is expected to outline her economic priorities further during a speech in North Carolina on Friday.
High living costs, including the rising prices of medications, remain a top concern for voters. Although Biden has struggled to gain recognition for his efforts to reduce costs, recent polls suggest Harris faces less criticism on economic issues. Voters continue to trust former President Donald Trump more on the economy, but Harris has an opportunity to address this gap in the coming weeks.
Future of Medicare Drug Price Negotiations
The Congressional Budget Office projects that Medicare’s drug price negotiations will save the government $98.5 billion over the next decade. Despite pushback from the pharmaceutical industry, including lawsuits aimed at blocking the new prices, the Inflation Reduction Act is expected to have a long-term impact. The CBO estimates that the act will prevent just 13 new drugs from coming to market over the next 30 years, out of an anticipated 1,300.
Many of the pharmaceutical companies involved in this round of negotiations have reassured their investors, stating that they can manage the financial impact of lower Medicare prices.
Looking ahead, Medicare will begin negotiations on the next set of drugs early next year. The government plans to continue this process annually, targeting up to 20 drugs for price negotiations by the end of the decade.
