A key provision to reduce prices for seniors came closer to reality Tuesday as the Biden Administration announced the first ten prescription drugs that will be subject to price negotiations between pharmaceutical companies and Medicare. 

Under the Inflation Reduction Act, Medicare now has the power to directly negotiate drug prices with manufacturers for the first time in the federal program’s nearly 60-year history. The new prices will be announced next year and will take effect in 2026. 

Barring successful legal challenges by drug companies, these ten drugs will be only the first to be negotiated. For the next four years, 15 drugs each year will be selected; following that, the number will go up to 20 drugs a year. 

“For far too long, Americans have paid more for prescription drugs than any major economy,” President Biden said in a statement Tuesday. “And while the pharmaceutical industry makes record profits, millions of Americans are forced to choose between paying for medications they need to live or paying for food, rent, and other basic necessities. Those days are ending.” 

The ten drugs chosen for the initial round of negotiations are Eliquis and Xarelto, used to prevent blood clotting to reduce the risk of stroke; Januvia, Jardiance, and Farxiga, used to treat diabetes; Enbrel, used to treat rheumatoid arthritis; Imbruvica, used to treat different types of blood cancers; Stelara, used to treat Crohn’s disease; and Fiasp/NovoLog, both insulins. 

The drugs announced Tuesday are among the top 50 with the highest spending for Medicare Part D, which covers prescription drugs that seniors fill at retail pharmacies. According to a White House fact sheet, the 10 drugs accounted for $50.5 billion, or about 20 percent, of total Part D prescription drug costs from June 1, 2022 to May 31, 2023. 

According to the White House, 9 million Medicare Part D enrollees took the drugs selected for negotiations and paid a total of $3.4 billion in out-of-pocket costs for these drugs in 2022. For enrollees without Medicaid or some other forms of financial assistance, average annual out-of-pocket costs for these drugs were as high as $6,497 per enrollee in 2022. 

As we detailed earlier on our blog, Black seniors on Medicare and other people of color could see some of the biggest cost savings. HHS highlights this example (along with other helpful demographic data): “Black enrollees represent about 16 percent of the total users for Januvia, 16 percent for Farxiga, 18 percent for Entresto, and 17 percent for NovoLog. For these drugs, the share of Black enrollees using each drug is relatively high compared to Black enrollees’ representation in the Part D population (11 percent).” 

Now that the first ten drugs subject to price negotiations have been announced, pharmaceutical companies have until October 1 to sign agreements to join the negotiations. The Center for Medicare and Medicaid Services will then make an initial price offer to manufacturers in February 2024, and those drug companies will have one month to accept or make a counteroffer. The negotiations will end in August 2024, with agreed-upon prices published on September 1, 2024. The new prices will go into effect January 2026. 

Already, at least seven lawsuits contesting the legality of the drug negotiations have been filed in federal courts throughout the country. In some cases, federal judges have been asked to fast-track a decision, in keeping with the pharmaceutical industry’s hopes that negotiations will not get off the ground. 

In his statement, President Biden said Big Pharma last year spent $400 million to try to stop drug negotiations from happening. “Let me be clear: I am not backing down,” he said. “There is no reason why Americans should be forced to pay more than any developed nation for life-saving prescriptions just to pad Big Pharma’s pockets. For many Americans, the cost of one drug is the difference between life and death, dignity and dependence, hope and fear.” 

Earlier this month, the Coalition on Human Needs joined more than 70 other groups in signing a letter asking the drug companies, PhRMA, and the U.S. Chamber of Commerce to drop their litigation efforts. 

“We stand with patients across the country whose lives and well-being depend on access to affordable prescription drugs,” the letter states. “We will not relinquish these commonsense reforms while high drug prices remain a matter of life and death for so many Americans. We call on you to stop suing Medicare and negotiate lower drug prices now.”