Election move? 'We have finally defeated Big Pharma,' says Biden as US reduces prices of 10 top-selling Medicare drugs

Aug. 16, 2024, 4:21 a.m.

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The United States has negotiated lower prices for 10 of the most popular prescription medications used by Medicare, achieving reductions of up to 79 percent. This effort is anticipated to save $6 billion in the first year as part of a plan celebrated by President Joe Biden on Thursday. The plan aims to address public frustration with high drug prices ahead of November's elections.

Biden’s signature Inflation Reduction Act, signed into law in 2022, was the first to allow Medicare to negotiate prices for some of the most costly drugs that the program covers for 66 million people. The new prices will go into effect in 2026.

Advertisement “We finally beat Big Pharma,” Biden said at an event in Largo, Maryland, alongside Vice President Kamala Harris.

The administration hopes the savings will ease Americans’ anger about high prices, an issue they frequently say is their top concern headed into the closely contested Nov. 5 presidential election between Harris and Republican former President Donald Trump.

“My entire career, I have worked to hold bad actors accountable and lower the cost of prescription drugs,” Harris said. “Medicare can use that (collective bargaining) power to go toe-to-toe with Big Pharma and negotiate lower drug prices.”

The new prices represent cuts to individual list prices that do not reflect any rebates and discounts the government may already be getting for the drugs, although the government’s estimated savings from the negotiations do take those discounts into account.

Harris’ tie-breaking Senate vote passed the law that allows for the drug-price negotiations, which no Republicans supported. In a statement, she also pointed to her work as California attorney general holding “big pharma accountable for their deceptive and illegal practices.”

Though it was an official event, Biden turned his speech in the gymnasium into a de facto campaign rally, saying Harris would make a “hell of a president” and criticising Republicans for not supporting Medicare’s right to negotiate drug pricing.

Republican House leadership, including Speaker Mike Johnson, described the power as “price fixing” in a statement. “Their prescription drug price fixing scheme has accomplished just two things: driving up health care costs and crushing American innovation in medicine.”

Advertisement The administration stated that individuals covered by Medicare, primarily serving Americans aged 65 and older, would also experience $1.5 billion in savings on out-of-pocket expenses for prescription medications in 2026.

Merck & Co’s diabetes drug Januvia faces the steepest percentage price cut of the drugs on the list, decreasing 79 per cent, while Novo Nordisk’s insulin aspart products will face the second steepest of 76 per cent, according to the government.

The remaining eight medications on the list will experience reductions ranging from 38 to 68 percent.

BMO Capital Markets analyst Evan Seigerman said the important comparison for investors would be the difference between the product’s newly discounted price and the ultimate net price.

Advertisement US Health Secretary Xavier Becerra stated in an interview that the government was hesitant to disclose net prices due to their confidential nature. He declined to comment on whether these prices would be made public in the future.

Pharmaceutical companies expressed their opposition to the new discounts, arguing that these reductions might not necessarily lead to lower out-of-pocket expenses for patients and could potentially hinder future advancements in drug development.

Several companies last month indicated that they did not anticipate a substantial impact on their operations after reviewing the confidential pricing information provided by the government.

Stacie Dusetzina, a professor at Vanderbilt University, noted that while the new discounts and savings were promising, they weren't drastic enough to raise concerns for the pharmaceutical industry.

Advertisement “It suggests to me that companies are still going to be able to make profits have incentives to innovate,” she said.

Shares of Eli Lilly fell by 0.7 per cent while those of Pfizer, Merck and AbbVie fell marginally in morning trading. Amgen and Bristol Myers Squibb’s shares rose over 1 per cent and US -listed shares of Novo Nordisk were up nearly 2 per cent.

Price Pain

BMS, which makes the bloodthinner Eliquis, said the 56 per cent price cut to its drug would not solve the “biggest problem in patient affordability” of out-of-pocket costs that are determined by health insurers and pharmacy benefit managers.

Advertisement Pharmacy benefit managers are entities that manage prescription drug benefits for health insurers, large employers, and Medicare prescription drug programs. They negotiate fees and volume-based discounts, commonly referred to as rebates, on behalf of payers with drug manufacturers and pharmacies.

Johnson & Johnson, whose Crohn’s disease medicine Stelara and bloodthinner Xarelto face list price cuts of 66 per cent and 62 per cent respectively, said patients would face higher costs as a result of the price cuts.

Novo and AstraZeneca, whose diabetes medication Farxiga has experienced a 68 per cent list price reduction, indicated that they were not willing to withdraw from the Medicare program to avoid accepting the new prices.

A representative for AbbVie, whose cancer drug Imbruvica will see the smallest percentage cut of 38 per cent, stated that the negotiated price was within the anticipated range.

More than half of voters in 2020 were over the age of 50, and healthcare consumes about 8 per cent of Americans’ spending, according to Pew Research Center and Labor Department data.

Inflation has eased, but higher prices since the COVID-19 pandemic have continued to burden consumers. Consumer prices increased by 2.9 per cent over the 12 months ending in July, and the category that includes prescription drugs saw a similar increase in price.

The Medicare agency stated that it accepted revised counter-proposals submitted by the drug manufacturers for four of the 10 selected drugs, while drug companies accepted its final offers on five.

The administration released its list of the 10 most expensive drugs for Medicare that would be subject to negotiations last year.

The pharmaceutical industry has actively opposed the Medicare negotiations, with several companies filing lawsuits against the administration and expressing concerns that they might need to scale back certain drug development programs as a consequence.

The next round of Medicare drug price negotiations is anticipated to include 15 additional medications and is scheduled to commence in February.

Government officials are expected to provide more detailed information next year on how they arrived at the price reductions scheduled for 2026.