By Jeff Mason, Patrick Wingrove and Trevor Hunnicutt
LARGO, Maryland/WASHINGTON (Reuters) – The United States has negotiated a price cut of up to 79% on 10 of the best-selling prescription drugs used by Medicare, hoping to save $6 billion in the first year as part of a plan announced by President Joe Biden on Thursday aimed at easing anger over high prices before the November election.
Biden's Inflation Reduction Act, signed into law in 2022, was the first to allow Medicare to negotiate prices for some of the most expensive drugs covered by the program for 66 million people. The new prices will take effect in 2026.
“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 over high prices, an issue they frequently say is their top concern ahead of the tight Nov. 5 presidential election between Harris and Republican former President Donald Trump.
“I've worked my entire career to hold bad actors accountable and lower the cost of prescription drugs,” Harris said. “Medicare can use that (collective bargaining) power to compete with Big Pharma and negotiate lower drug prices.”
The new prices represent cuts to individual list prices that do not reflect any rebates or discounts the government may be receiving for the drugs, although the government's estimated savings from the negotiations do take those discounts into account.
Harris's decisive vote in the Senate approved the law allowing drug price negotiations, which no Republicans supported. In a statement, she also highlighted her work as California attorney general to hold “Big Pharma accountable for their deceptive and illegal practices.”
Though it was an official event, Biden turned his gymnasium speech into a de facto campaign rally, saying Harris would be “a great president” and criticizing Republicans for not supporting Medicare’s right to negotiate drug prices.
House Republican leaders, including Speaker Mike Johnson, described the power as “price fixing” in a statement. “Their prescription drug pricing scheme has accomplished only two things: driving up health care costs and crushing American innovation in medicine.”
The administration said people covered by Medicare, which primarily serves Americans 65 and older, would also save $1.5 billion in out-of-pocket costs for prescription drugs in 2026.
Merck & Co's diabetes drug Januvia faces the steepest percentage price cut of the drugs on the list, falling 79%, while Novo Nordisk's (NYSE:) insulin aspart products will face the second-steepest cut of 76%, according to the government.
The other eight drugs on the list face cuts of between 68% and 38%.
Evan Seigerman, an analyst at BMO Capital Markets, said the important comparison for investors would be the difference between the product's recently discounted price and the final net price.
U.S. Health Secretary Xavier Becerra said in an interview that the government was reluctant to share net prices because they are considered confidential and declined to comment on whether they would be made public in the future.
Drugmakers have voiced opposition to the new discounts, which they said would not necessarily reduce out-of-pocket costs for patients and could hamper future innovation.
Several said last month they did not expect a significant impact on their businesses after seeing the government's confidential pricing.
Stacie Dusetzina, a professor at Vanderbilt University, said that while the new discounts and savings were encouraging, they were not aggressive enough to cause concern in the industry.
“It suggests to me that companies will still be able to make profits if they have incentives to innovate,” he said.
Eli Lilly (NYSE:) shares fell 0.7% while shares of Pfizer (NYSE:), Merck and AbbVie (NYSE:) fell slightly in morning trading. Amgen (NASDAQ:) and Bristol Myers (NYSE:) Squibb shares rose more than 1% and U.S.-listed Novo Nordisk shares rose nearly 2%.
PRICE PAIN
BMS, which makes the blood thinner Eliquis, said the 56% price cut for its drug would not address the “larger patient affordability issue” of out-of-pocket costs determined by health insurers and pharmacy benefit managers.
Pharmacy benefit managers are companies that handle prescription drug benefits for health insurance companies, large employers, and Medicare prescription drug plans. They negotiate volume-based rates and discounts, known as rebates, on behalf of payers with drug manufacturers and pharmacies.
Johnson & Johnson (NYSE:), whose Crohn's disease drug Stelara and blood thinner Xarelto face list price cuts of 66% and 62% respectively, said patients would face higher costs as a result of the price cuts.
Novo and AstraZeneca (NASDAQ:), whose diabetes drug Farxiga saw its list price cut by 68%, said they were unwilling to leave Medicare rather than accept the new prices.
A spokesman for AbbVie, whose cancer drug Imbruvica will face the smallest percentage cut of 38%, said the negotiated price was within the anticipated range.
More than half of voters in 2020 were over 50, and health care consumes about 8% of Americans' spending, according to data from the Pew Research Center and the Department of Labor.
Inflation has eased, but higher prices since the COVID pandemic have weighed on consumers. Consumer prices rose 2.9% in the 12 months through July, with the category that includes prescription drugs up about the same percentage.
The Medicare agency said it accepted revised counteroffers proposed by drugmakers for four of the 10 selected drugs, while pharmaceutical companies accepted their final offers for five.
The administration last year released its list of the 10 most expensive Medicare drugs that would be subject to negotiations.
The pharmaceutical industry has fought hard to block Medicare negotiations, with several companies suing the administration and warning that they may have to cut some drug development programs as a result.
The next round of Medicare drug pricing negotiations is expected to include 15 more drugs and begin in February.
Government officials are expected to provide more details on how they arrived at the 2026 price cuts next year.
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