The first price negotiations between Medicare and drug companies has been underway since February. What do we know about how it’s going?
SCOTT SIMON, HOST:
The Biden administration is now wrapping up negotiations to reduce prices for Medicare recipients on the very first batch of medicines that treat diabetes, arthritis, cancer and heart failure. NPR’s pharmaceuticals correspondent Sydney Lupkin joins us. Sydney, thanks for being with us.
SYDNEY LUPKIN, BYLINE: Hi, Scott.
SIMON: This represents something quite major for both the president and now certainly Vice President Kamala Harris.
LUPKIN: Yeah. In Biden’s letter announcing that he was stepping aside, one of the first things that he touted was lowering prescription drug prices. And Medicare drug price negotiation is really the big achievement in that area. It’s also something that Trump originally campaigned on, and then he kind of backpedaled. So the idea is popular.
Here’s the context. When Medicare Part D was created almost two decades ago to cover prescription drugs, it was banned from negotiating drug prices. Of course, negotiation happens on a smaller scale. Individual plans negotiate discounts with drugmakers. But there are 50 million seniors who get their drugs through Medicare Part D. And that is a lot of bargaining power. The Inflation Reduction Act allows that large-scale negotiation for 10 drugs now, then 15 starting next year and then 20 by the end of the decade.
SIMON: How far along is the negotiation process now?
LUPKIN: So they’re pretty far along. The drug companies and the government have been going back and forth actually negotiating since February. The official end of negotiations is August 1, and then the settled prices should be announced on September 1.
SIMON: That’s, I believe, right in the middle of the election season, isn’t it?
LUPKIN: Right in the middle of election season, right after the DNC wraps up. And that’s the way the negotiation calendar was set up more than a year ago. One caveat is that the prices actually won’t go into effect until January 2026.
SIMON: Do we know if the government was able to get prices down a lot?
LUPKIN: You know, right now, we don’t know. There has been a ton of secrecy, but that may end next week when the negotiated prices are locked in. The government has said it won’t announce them to the public for another month, but drug companies might do it sooner. Still, the drugmakers continue to oppose this and are in the middle of a bunch of lawsuits against the government to keep these negotiated prices from going into effect. They say this is all unconstitutional, that it’s price setting, that it’s going to hurt research and drug innovation and that companies won’t bring as many drugs to market. But what they’re telling their investors about the negotiations is actually less pessimistic. Here’s Johnson & Johnson executive Jennifer Taubert earlier this month.
(SOUNDBITE OF ARCHIVED RECORDING)
JENNIFER TAUBERT: We do anticipate a net unfavorable impact in 2025. However, as outlined at our enterprise business review last November, you know, we do anticipate, as a business, growing 3%-plus next year and then 5- to 7% out through 2030.
LUPKIN: So even though the company has two drugs undergoing Medicare price negotiation now – Stelara for psoriasis and Xarelto, which is a blood thinner – it is still expecting some pretty solid growth. Novartis makes Entresto for heart failure, another drug under negotiation. The company told investors, overall, it is able to manage the losses from lower Medicare prices now, but it might get tricky in the future as more drug prices get negotiated.
SIMON: So pharmaceutical companies don’t like it, but they certainly haven’t walked away. Who would benefit?
LUPKIN: So big picture, the nonpartisan Congressional Budget Office scored the negotiation part of the Inflation Reduction Act and said it would save the government, AKA taxpayers, $98.5 billion over the next 10 years. Medicare beneficiaries who take these drugs should see more consistent copays starting in 2026. And next year, everyone on Medicare Part D should see the $2,000 out-of-pocket cap, which is another Inflation Reduction Act changed to lower drug costs for seniors.
SIMON: NPR pharmaceuticals correspondent Sydney Lupkin. Thanks so much.
LUPKIN: You bet.
Copyright © 2024 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
