Medicare to negotiate lower prescription drug prices

Medicare will now be allowed to negotiate prices for ten life-saving medications that treat chronic and life-threatening diseases from cancer to diabetes.

The names of the first 10 Medicare drugs whose prices the federal government will negotiate directly with manufacturers were released Aug. 29.

Allowing Medicare to negotiate lower drug prices is expected to result in reduced out-of-pocket costs for seniors and it will save money for American taxpayers. The Congressional Budget Office (CBO) estimates that price negotiating provisions in the Inflation Reduction Act (IRA) will save the federal government nearly $102 billion over the coming decade.

It marks the first time in history that the price of life-sustaining medications that millions of older Americans in the nation’s largest health program rely upon to prevent strokes and blood clots and to treat diabetes and cancer will be subject to direct negotiation.

“This is an important first step toward finally allowing Medicare to use its purchasing power to lower drug prices,” says Nancy LeaMond, AARP executive vice president and chief advocacy and engagement officer. “Medicare spends more than $135 billion on prescription drugs every year.” 

“There’s absolutely zero reason why Medicare shouldn’t be allowed to use its bulk purchasing power to lower the insane price of much-needed medications for all Americans,” said Joseph Geevarghese, the executive director of Our Revolution, a group launched from the ashes of Senator Bernie Sanders’ unsuccessful 2016 campaign for president.

Between June 2022 and May 2023, Medicare Part D spent $50 billion on the first 10 drugs selected for negotiation. That represents 20 percent of Part D spending during that time period. These medications were used by 8.2 million Medicare beneficiaries. 

In the long run, Medicare beneficiaries who often must pay a percentage of a drug’s cost would benefit directly from lower negotiated prices, and the government could use the money saved to shore up Medicare’s finances. Negotiations will be expanded to include additional drugs in the years ahead, which would magnify the savings. Lower Medicare spending is also expected to lead to lower Part D premiums.

“Letting Medicare negotiate for lower prices is a commonsense solution that will save seniors money and cut government overspending,” LeaMond says.

Under the Inflation Reduction Act, the government was required to make public by Sept. 1 the 10 medications covered by Medicare Part D that will be included in the first round of the price negotiation process. The manufacturers of those drugs and the Centers for Medicare & Medicaid Services (CMS) are scheduled to begin negotiating in early October, with the negotiated prices to take effect in 2026.

In order to be eligible for negotiation, medicines that are called small molecule drugs — those you typically get at the pharmacy and take in pill form — must have been on the market for seven years and not have a generic alternative.

Biologics, which are drugs made from living organisms rather than chemicals, must have been available for 11 years with no nearly identical alternatives known as biosimilars available.

Federal officials drew the list of 10 from among the 50 medications that Medicare Part D spends the most on and that are used most by beneficiaries. All but three of the first 10 drugs are small-molecule medicines.

Drugmakers that decline to negotiate prices face substantial financial penalties or must stop participating in Medicare and Medicaid, the health coverage program for people with low incomes.

A long time coming

David Mitchell, founder of Patients for Affordable Drugs Now, has been fighting for lower prescription drug prices for years. Mitchell has an incurable blood cancer, and the drugs he takes together carry an annual price of almost $1 million. Mitchell’s copays are based on those high prices. One of his drugs, Eliquis, is on the list of drugs to be negotiated.

Lisa McCormick, a progressive champion in New Jersey, explained that advocates fought a long time for improvements in America’s health insurance system and many remain hopeful for even bigger changes.

“Medicare beneficiaries often have to pay a significant amount out-of-pocket for prescription drugs. The ability to negotiate drug prices could help to lower these costs, making it easier for seniors to afford the medications they need,” said McCormick. “The federal government spends a significant amount of money on prescription drugs for Medicare beneficiaries, so the ability to negotiate drug prices should help to reduce this cost, which could free up resources for other health care priorities.”

“In theory, increased competition in the pharmaceutical market could lead to lower prices for all consumers, not just Medicare beneficiaries,” said McCormick. “Negotiating prescription drug prices will reduce the cost to taxpayers by $10 billion each year.”


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