CMS Announces First Drugs for Medicare Price Negotiations

August 29, 2023 - Kicking off the much-awaited drug price negotiations, the United States Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services (HHS) — under authority from the Biden administration — announced the first ten drugs entering price negotiations.

“Today marks a significant and historic moment for the Medicare program with the announcement of the first drugs selected for Medicare drug price negotiation,” said CMS Administrator Chiquita Brooks-LaSure, in the CMS release. “Our goal with these negotiations is to improve access to some of the costliest drugs for millions of people with Medicare while driving competition and innovation.” 

The drugs include Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara, and Fiasp with its various delivery mechanisms. According to the HHS press release, between June 2022 and May 2023, these drugs accounted for $50.5 billion in Medicare Part D gross covered prescription drug costs, about a fifth of all drug costs.

While the pricing negotiations are expected to benefit patients and payers, pharmaceutical leaders can no longer drive up drug prices and increase profits.

“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,” said HHS Secretary Xavier Becerra in the HHS statement.

“Although drug companies are attempting to block Medicare from being able to negotiate for better drug prices, we will not be deterred. The Biden–Harris Administration will continue working to ensure that Americans with Medicare have access to innovative, life-saving treatments at lower costs.”

The CMS provided a timeline for drug price negotiations, giving pharmaceutical companies time to prepare for potential negotiations and profit changes. By October 1, 2023, the pharmaceutical leaders will be required to sign the agreements proposed by the federal government or opt to enter the negotiation process.

Companies that choose to enter the negotiation process will be allowed to submit manufacturer-specific considerations to CMS by October 2, 2023. The companies will begin the negotiation process with CMS throughout the remainder of 2023 until August 1, 2024, as the administration considers multiple factors, including input from patients, caregivers, consumers, and other stakeholders.

By September 1, 2024, CMS will release the finalized list of negotiated maximum fair prices to go into effect in 2026.

Understanding that these are the new standards, pharmaceutical leaders are unhappy with the proposed process.

“Once you start a negotiation with a maximum price, it's hard to think what a negotiation looks like because you know what that number is, and it's already drastically cut. But how that will play out, what is the logic that'll be used, and what are the comparators that'll be used to progress that negotiation? It'll be interesting to see,” noted Pat Fortune, PhD, Vice President of Strategic Innovation Leaders at Mass General Brigham Innovation, in a panel at the 2023 World Medical Innovation Forum (WMIF).

Although orphan drugs are generally exempt from negotiations enforced by the Inflation Reduction Act (IRA), panelists at the WMIF postulate that the price caps will stifle pharmaceutical innovation.

“Companies will be disincentivized to try to make a second in class. But — putting my physician hat back on — having multiple drugs against a target in a class is very advantageous. We were chatting in the hallway about how this drug might have side effect A while this one might have side effect B. They're probably a similar profile from those criteria, but from a patient choice, one might be better. And that's going to be stifled by this provision,” explained John Lepore, MD, SVP and head of researcher at GSK.

Regardless of disapproval or contempt from pharmaceutical companies, this is the new pharmaceutical pricing landscape. Companies must navigate through negotiations and evaluate what it means for their bottom line.

Moving forward, the actions of these companies could set a precedent for other pharmaceutical manufacturers as they enter price negotiations. CMS notes that up to 15 more drugs will be identified for price negotiation to go into effect in 2027 and another 15 for 2028. Starting with prices that will change in 2029, the administration will identify up to 20 drugs each year for negotiations.