The Biden administration and the pharmaceutical industry have wrapped up the first round of landmark drug price negotiations after engaging in talks that may lead to lower prices for some of the most widely used drugs covered under Medicare.
The US government and drugmakers bargained largely outside of the public’s view for the past six months over the prices of 10 prescription drugs selected for the Medicare Drug Price Negotiation Program. The program is a signature element of President
While Aug. 1 marks the end of the first cycle of talks, the Centers for Medicare & Medicaid Services is slated to announce the negotiated prices—dubbed the maximum fair prices—by Sept. 1. The prices will go into effect in January 2026.
The pharmaceutical industry and Medicare beneficiaries are eagerly waiting to see how the negotiated prices will affect their bottom lines and pocketbooks as billions of dollars are at stake. Widely used blood thinners from
The industry has decried the program as unconstitutional and a harm to research and development, but the agency expects the program to reduce government spending and lower health costs for beneficiaries.
“These negotiations are just the beginning,” a spokesperson for the Department of Health and Human Services said in a statement. “The Biden-Harris Administration is unwavering in our commitment to lower drug prices and put hard-earned money back in Americans’ pockets.”
Drugmakers had until Wednesday to respond to the CMS with final price offers after receiving initial offers in February.
Final Offers
Manufacturers including AstraZeneca and Merck confirmed with Bloomberg Law that they submitted final price offers to the agency, while other pharmaceutical giants like Johnson & Johnson and Bristol Myers disclosed they had done so in their latest quarterly earnings call.
The industry so far says negotiation information provided to the agency is confidential and once the process has concluded, the CMS will make public the maximum fair price for the drugs.
“There was always this question mark on if the prices will be known before, but so far everything seems to be running within the schedule,” said Mariana Socal, associate professor at Johns Hopkins Bloomberg School of Public Health. “The agency is following through with their requirements and mandates as determined by the Inflation Reduction Act.”
The Congressional Budget Office estimated that negotiated prices will lower the health program’s spending total by almost $100 billion through 2031. In a recent 12-month period, Medicare paid $16.5 billion for Eliquis, a blood thinner from Bristol Myers that was selected for price negotiation.
Patient advocacy groups like AARP—representing people 50 and older—say the program will allow millions of older people gain access to affordable prescription drugs and save taxpayers billions of dollars.
“The new law is a commonsense solution that will save seniors money and hold big drug companies accountable,” a spokesperson said.
No indication of the maximum fair prices has been released during the process, but initial price offers from the CMS were based on evidence related to therapeutic alternatives; costs of research and development; unit costs of production and distribution; and market, revenue, and sales data.
Predictions on Prices
Some top pharmaceutical executives in half-year earning calls signaled that negotiated prices may be manageable after seeing final offers from the agency.
Bristol Myers CEO Chris Boerner on July 26 said “now that we have seen the final price, we’re increasingly confident in our ability to navigate the impact of IRA on Eliquis.”
Some drug pricing analysts predict negotiated prices might not be far from current net prices—the final price of the product after discounts—of selected drugs.
Because “net prices are pretty low for the insulin category,” they could face the smallest hit, Duane Wright, a senior government analyst for Bloomberg Intelligence, told Bloomberg Law.
But Johnson & Johnson’s inflammatory disease drug Stelara and
He said it’s possible some drugmakers could be confronted by a 50% reduction from current net prices.
But when thinking of the success of the negotiations, it’s important to note “negotiated prices need to fall below the net prices that Part D plans were paying after discounts” and “for drugs selected for negotiation, manufacturers do not need to pay mandatory discounts under the new discount program,” said Inmaculada Hernandez, a professor at the Skaggs School of Pharmacy and Pharmaceutical Sciences at the University of California, San Diego.
Hernandez co-authored a June study in the Journal of Managed Care & Specialty Pharmacy on price benchmarks for selected drugs and their therapeutic alternatives, which concluded different negotiation scenarios for the first 10 drugs. If a drug has a therapeutic alternative, that likely guided the initial price offer from the CMS.
Legal Challenges Suffer Setbacks
Meanwhile, legal challenges by drugmakers and others seeking to scuttle the price negotiation program remain.
Lawsuits filed by Bristol Myers, Johnson & Johnson, and AstraZeneca have reached the US Court of Appeals for the Third Circuit, while other cases from the US Chamber of Commerce,
A lawsuit from top lobbying group the Pharmaceutical Research and Manufacturers of America awaits a decision from the US Court of Appeals for the Fifth Circuit after a lower court tossed it for lack of jurisdiction and venue.
Federal judges so far have sided with Biden administration, rejecting a gamut of arguments that allege the program violates various amendments under the US Constitution and was unlawfully implemented on procedural grounds.
Plaintiffs are keeping an eye on the program’s timeline as they argue their cases.
Merck, whose lawsuit is before the US District Court for the District of Columbia, is urging the court to rule on its case “as soon as practicable” so that program’s constitutionality “can be adjudicated by the D.C. Circuit and Supreme Court before its regime of forced sales takes full effect in 2026.”
“CMS is continuing to roll this out with so many lawsuits, and I think it’s because they have no choice,” said Yaniv Heled, a professor at Georgia State University College of Law. “They’ve committed to a certain timeline, and so from that moment, unless a court issues an injunction, they have to go through with it.”
Questions After Draft Guidance
While the CMS is continuing to check off major deadlines in the program’s first cycle, the agency has already rolled out its plans for the second round of negotiations.
The CMS in May published its draft guidance regarding the parameters for the next set of price talks, which is slated to include 15 Medicare Part D drugs. The guidance also introduced details on the implementation of the maximum fair price for drugs in 2026 and 2027.
The draft, which is expected to be finalized in the fall, opened up a wave of questions on how negotiated prices will reach eligible Medicare beneficiaries. Some industry members have signaled concerns over the slew of responsibilities handed to drugmakers and dispensing entities to carry out the drug’s maximum fair price.
It also remains to be seen how the Biden administration program would be affected after the November presidential election.
“All eyes are on the upcoming election generally, but I don’t think a Trump-Vance administration will touch the drug price negotiation process in flight given the bipartisan buy-in to reduce drug costs for seniors and Trump’s own ‘blueprint’ to lower drug prices during his term,” said Melissa Wong, health-care attorney for Holland & Knight’s Boston office.
“The biggest levers of uncertainty here remain pending litigation and all the little details that CMS will continue to roll out in regulatory guidance,” she said.
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