For the first time, Medicare has negotiated to reduce the price of 10 high-cost prescription drugs. The agency said on Thursday that if the new prices were in effect last year, Medicare would have saved $6 billion. It estimates people with Medicare prescription drug coverage will see aggregated savings of $1.5 billion in their personal out-of-pocket costs next year.
The negotiated drugs in the Medicare Part D prescription drug program are among the most expensive and most frequently dispensed drugs in the Medicare program and are used to treat conditions such as heart disease, diabetes, and cancer.
In August 2023, HHS announced the first 10 drugs covered under Medicare Part D selected for the first cycle of negotiations.
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The new prices, which range from 38 percent to 79 percent discounts off of list prices, will take effect in January 2026.
“Americans pay too much for their prescription drugs. That makes today’s announcement historic. For the first time ever, Medicare negotiated directly with drug companies and the American people are better off for it,” said U.S. Department of Health and Human Services (HHS) Secretary Xavier Becerra in this week's announcement.
The Centers for Medicare & Medicaid Services (CMS) will select up to 15 more drugs covered under Part D for negotiation for 2027 by February 1, 2025. CMS will select up to 15 more drugs covered by Part B or Part D for 2028, and up to 20 more Part B or Part D drugs for each year after that, as required by the Inflation Reduction Act.
Becerra said that the Congressional Budget Office (CBO) predicted about $100 billion savings over 10 years from the drug negotiations and a $3.7 billion savings in the first year alone. “Today we’re announcing that in our first year of negotiations we are saving Medicare an estimated $6 billion and Americans who pay out of pocket will be saving another $1.5 billion moving forward,” he said. “Empowering Medicare to negotiate prices not only strengthens the program for generations to come, but also puts a check on skyrocketing drug prices.”
To illustrate the potential savings, CMS offered a hypothetical example of a senior with Medicare who takes Stelara. The senior would pay a 25 percent coinsurance on the drug which may amount to about $3,400 today for a 30-day supply. When the negotiated price goes into effect in 2026, that same 25 percent coinsurance would cost the beneficiary about $1,100 before the person reaches the catastrophic cap, after which the beneficiary will pay no more out of pocket on their prescription drugs. A beneficiary’s actual costs will depend on their plan’s benefit design.
The selected drugs include Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara, and Fiasp; Fiasp FlexTouch; Fiasp PenFill; NovoLog; NovoLog FlexPen; NovoLog PenFill. These drugs accounted for $56.2 billion in total Medicare spending, or about 20 percent of total Part D gross spending in 2023, according to CMS. Overall, total Part D gross spending for the 10 selected drugs more than doubled from 2018 to 2022, from about $20 billion to about $46 billion, an increase of 134 percent. Medicare enrollees paid a total of $3.4 billion in out-of-pocket costs in 2022 for these drugs.
The Office of the Assistant Secretary for Planning and Evaluation (ASPE) said in a report that from 2018 to 2023, list prices for these drugs increased as much as 55 percent.
“CMS negotiated in good faith on behalf of the millions of people who rely on these 10 drugs for their health and well-being. The new negotiated prices will bring much needed financial relief, affordability, and access,” said Meena Seshamani, M.D., Ph.D., CMS deputy administrator and director of the Center for Medicare, in the announcement. “Throughout the process, we remained true to our commitment to be thoughtful and transparent, meeting publicly with patients, providers, health plans, pharmacies, drug companies and others to help inform the process. We will continue to do so for future cycles. Our team is actively working on the next cycle of negotiations where we will combine what we have learned from this first cycle and apply it in negotiating prices for the next round of up to 15 selected drugs.”
In addition to these newly negotiated prices, people with Medicare are already experiencing lower drug costs thanks to the Inflation Reduction Act. And, next year, all Medicare Part D enrollees will benefit from a $2,000 out-of-pocket cap on their prescription drug costs, further making prescription drugs more affordable for seniors and people with disabilities.
For more information, click here for a fact sheet.