What to watch when Medicare releases first negotiated drug prices
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The confidential nature of the Biden administration's drug price negotiations has made the process and outcome of the long-sought Democratic policy goal something of a mystery.
Why it matters: The administration is expected to announce the results of those negotiations this week, and there's plenty of speculation about the actual savings that will be realized starting in 2026 — and how aggressive the Biden administration got on pharma in an election year.
Where it stands: Drugmakers have indicated that the negotiated prices for this first 10 drugs won't have much impact on their projected bottom lines.
- But the results could hint at what's to come in subsequent rounds, as the number of drugs up for negotiation expands, possibly to include blockbuster GLP-1 weight-loss drugs.
Context: The Centers for Medicare and Medicaid Services last summer chose 10 drugs that account for some of the highest total costs for Medicare, including Bristol Myers Squibb and Pfizer's blood-thinner Eliquis and Boehringer Ingelheim's diabetes drug Jardiance.
- CMS and drugmakers have been going back and forth since February on how to price the drugs. Meanwhile, the pharmaceutical industry and its allies have mounted a series of so far unsuccessful legal challenges to stop the talks.
Here are some key unanswered questions ahead of the announcement, expected Thursday morning:
What information will CMS release about the final drug prices? Analysts, policy experts and industry groups told Axios they're watching for whether Medicare officials announce specific levels of savings they achieved on each drug.
- If Medicare does announce levels of savings, it'll matter whether they measure those against drugs' current list prices, which are typically higher than what patients actually pay, or another figure that takes into account existing rebates and discounts, said TD Cowen analyst Rick Weissenstein.
- Statutorily, Medicare officials have to release the final prices for the selected drugs by Sept. 1 and justify those prices by March 1.
- "What data CMS chooses to release is a big question mark," said Chris Meekins, an analyst at Raymond James.
How will pharmacy benefit middlemen and prescription drug insurance plans react to the new prices? Medicare Part D insurers must cover all 10 selected drugs, but the Inflation Reduction Act doesn't specify where they need to place the drugs on their formularies.
- That could potentially lead to drug middlemen and insurers giving competing products more favorable placement on their formularies, said Lindsay Bealor Greenleaf, who leads federal and state policy at ADVI Health, which consults for pharmaceutical and biotech manufacturers.
- CMS will require plans to justify their decision if they move the drugs to different tiers or add more restrictive utilization management tools, per KFF.
How will investors and drugmakers react? The release of the maximum fair drug prices could clarify how risk-averse large pharmaceutical companies need to be in future acquisitions of smaller biotech companies, said John Stanford, executive director of Incubate, the life sciences investor lobbying group.
How will Medicare-negotiated prices compare with international drug prices? Branded drugs typically come with higher price tags in the United States than elsewhere in the world.
- "I think it's going to be very instructive to see how much the purchasing power of CMS gets us in terms of reduction," said Anna Kaltenboeck, who leads the prescription drug reimbursement work at consulting firm ATI Advisory.
What's next: Negotiated prices will go into effect Jan 1., 2026. CMS will announce as many as 15 additional drugs for the second round of negotiation by Feb. 1, 2025.
Adriel Bettelheim contributed reporting.
