The Biden administration has announced that representatives of Medicare, a public health insurance program that covers 47 million American seniors and disabled people, on Thursday sent initial offers to pharmaceutical companies in negotiations over 10 of the program’s most expensive and commonly used drugs.
The initial offers are part of a negotiation timeline set by law, and will set the tone for what is expected to be an intense process between the administration and drugmakers, who have launched at least 10 lawsuits against the government.
“I expect price negotiations to be tense and hostile,” Lawrence Gostin, a professor and faculty director at the O’Neill Institute for National & Global Health Law at Georgetown University.
He said the pharmaceutical industry stood to lose billions amid negotiations, and was using “every lawful channel” to “wage war” with the Biden administration. Drugmakers will have until 2 March to respond to Medicare negotiators.
“Ultimately, the US supreme court will make the final call, and a conservative supermajority is likely to be hostile to federal regulation of drug prices,” Gostin said. He expects drug prices to be a major theme in the 2024 presidential election.
The negotiations were made possible by a provision of the Inflation Reduction Act, which Joe Biden signed into law in 2022. Although the idea of allowing Medicare to negotiate drug prices has enjoyed popular support for decades, the idea floundered in Congress amid industry pushback. Problematically, surveys from groups such as the Kaiser Family Foundation show that many Americans are still unaware the process is under way.
Drug price negotiations already happen in other federal programs, such as in the Veterans Administration, which provides 4.2 million former military members with healthcare. The VA pays about half of what Medicare pays for drugs. Similarly, drug price negotiations are a central feature of health programs in many countries that enjoy lower drug prices than the US.
The drugs currently up for negotiation treat some of Americans’ most common health conditions – including blood clots, Crohn’s disease, arthritis, diabetes, heart disease and cancer, among others.
The administration said Americans were charged between two and three times more than people in other highly developed democracies, a figure that falls in line with widely cited research on pharmaceutical prices.
Officials said patients who use the 10 drugs in question – brand names such as Xarelto, a blood thinner produced by Johnson & Johnson and Jardiance, a diabetes drug from Eli Lilly and Boehringer Ingelheim – spent $3.4bn out-of-pocket in 2022, with some individuals paying as much as $6,500 in out-of-pocket costs.
In a statement, the administration said Biden “is laser focused on lowering costs, protecting Medicare and social security, and making sure his Inflation Reduction Act gives more seniors, people with disabilities, and families more breathing room”.
The negotiations will cover how much Medicare will pay for drugs dispensed from pharmacies beginning in 2026, and drugs dispensed by doctors in 2028. The Congressional Budget Office expects negotiations to save as much as $100bn in taxpayer money between 2026 and 2031.
