Medicare Drug Price Negotiation Could Benefit Millions of Seniors
Medicare Drug Price Negotiation Could Benefit Millions of Seniors
The first 10 drugs negotiated under the Inflation Reduction Act are likely to include treatments for chronic conditions—such as diabetes, cancer, and autoimmune disorders—and be used by millions of beneficiaries.
The Inflation Reduction Act includes historic changes to lower drug costs, including by enabling Medicare to negotiate prices for a select number of drugs each year. The first iteration of negotiation will apply to 10 Medicare Part D drugs and take effect in 2026. The U.S. Department of Health and Human Services (HHS) will negotiate another 15 drugs for the next two initial price applicability years—2027 and 2028—and will negotiate 20 drugs per year for 2029 and beyond.
The law sets specific eligibility criteria for drugs eligible for negotiation, and the Centers for Medicare and Medicaid Services (CMS) recently published proposed methodological guidance, for which it sought comments until April 14, 2023. By September 1, 2023, the secretary of health and human services will determine and publish a list of the first 10 Medicare Part D drugs to be negotiated, with prices to take effect in 2026.
Key dates for the first round of negotiation
- List of selected drugs published: September 1, 2023
- Negotiation process: October 1, 2023, to August 1, 2024
- Maximum fair prices published: September 1, 2024
- Beginning of price applicability period: January 1, 2026
The Center for American Progress reviewed 2021 Medicare Part D drug spending data and applied the criteria for negotiation eligibility as laid out in the Inflation Reduction Act and the CMS guidance to determine a list of drugs that could be eligible for the first round of Part D negotiation. According to this analysis, Eliquis, Januvia, NovoLog FlexPen, Enbrel SureClick, and Ibrance are among the drugs that are likely to be in the inaugural group negotiated. These drugs treat conditions such as blood clots, diabetes, autoimmune disorders, and breast cancer.
The Inflation Reduction Act has the potential to benefit millions of seniors with these first 10 drugs.
This analysis is limited to Part D drugs because, per the Inflation Reduction Act, the first round of negotiation will only apply to such drugs; negotiated prices for Medicare Part B drugs will first take effect in 2028. The eligibility criteria are subject to change, and while HHS will use more recent data, the data sources for some of these provisions are not yet finalized. As such, the list in Table 1 uses publicly available data, is only intended to highlight potential applications of the law and is subject to change. The Methodology at the end of the article provides more information about the limitations of this analysis.
Through Medicare drug price negotiation, the Inflation Reduction Act has the potential to benefit millions of seniors with these first 10 drugs—just the beginning of the improvements in access and affordability the law will bring to Medicare beneficiaries across the country.
Millions of Medicare beneficiaries could benefit from the first round of negotiation
The top 50 drugs with the highest spending for Medicare Part D are eligible for the first round of negotiation, which will take effect in 2026. The Inflation Reduction Act and proposed CMS guidance specify several criteria that render some of these drugs ineligible for negotiation. For example, these drugs must meet thresholds for their U.S. Food and Drug Administration (FDA) approval date and total Medicare expenditures, as well as have no available therapeutic alternatives on the market. See the Methodology for more detailed exclusion criteria.
Although HHS will determine the final 10 drugs eligible for negotiation, CAP used Medicare Part D data and the inclusion and exclusion criteria in the Inflation Reduction Act to compile a list of drugs that the agency may consider. (see Table 1) CAP’s list includes 22 potential drugs, although by statue CMS will negotiate only 10 drugs in the first year.
These drugs are used by millions of Medicare beneficiaries and make up some of the most cost-prohibitive drugs on the market. For example, in 2021, the top two drugs by total Medicare expenditures—Eliquis and Xarelto, which both treat and prevent blood clots and reduce the risk of stroke—were used by more than 3.1 million and 1.2 million beneficiaries, respectively. Other drugs likely to be eligible result in tens of thousands of dollars in spending per beneficiary. In 2021, Ibrance—a drug that treats breast cancer—cost more than $100,000 per beneficiary.
These drugs are used by millions of Medicare beneficiaries and make up some of the most cost-prohibitive drugs on the market.
Many of these drugs are used to treat chronic conditions, such as diabetes, autoimmune disorders, chronic obstructive pulmonary disease (COPD), and mental illnesses, as well as some types of cancer. For example, eight of the 22 drugs on CAP’s list of those likely to be eligible treat diabetes, including three of the most commonly used insulins: NovoLog FlexPen, Humalog KwikPen, and Levemir FlexTouch. Medicare beneficiaries with COPD and asthma may also benefit greatly: Three inhaled drugs—Symbicort, Spiriva, and Breo Ellipta—would likely be eligible for negotiation. In 2021, Symbicort was used by nearly 1 million beneficiaries, and Spiriva and Breo Ellipta were used by more than 650,000 beneficiaries each.
While CMS will not announce the inaugural selection of drugs for Medicare negotiation until later this year, this analysis illustrates which types of drugs may be eligible and demonstrates how many people could benefit. Lower drug prices promise to improve the affordability of and access to prescription medications for seniors and have the potential to improve the health of millions of people.
The author reviewed the eligibility and exclusion criteria for drug negotiation as stated in the Inflation Reduction Act and proposed CMS guidance. The data used may not be the same as that used by HHS, and the list of criteria applied by the author may not be exhaustive.
The top 50 drugs with the highest total spending for Medicare Part D are eligible for the initial negotiation. Among those, the secretary of health and human services will select 10 drugs and exclude those that meet the following exemption criteria:
- Time elapsed since FDA approval:
- Small molecule drugs first approved by the FDA after September 1, 2016 (seven years prior to the September 1, 2023, publication date)
- Biologic drugs first approved by the FDA after September 1, 2012 (11 years prior to the September 1, 2023, publication date)
- Drugs with generics or biosimilars on the market
- Small biotech drugs with total Part D expenditures that make up 1 percent or less of total Part D expenditures or account for 80 percent or more of total Part D expenditures on drugs made by the manufacturer
- Drugs with total 2021 Medicare expenditures that were less than $200 million
- Certain orphan drugs
- Plasma-derived drugs
Using the 2021 Medicare Part D spending data that CMS makes publicly available, the author selected the 50 drugs with the highest total spending. Using the Drugs@FDA search tool, the author reviewed the approval dates for each drug and eliminated small molecule drugs approved less than seven years and biologic drugs approved less than 11 years before September 1, 2023.
Also using Drugs@FDA, the FDA Orange Book, and the FDA Purple Book, the author eliminated drugs with therapeutic equivalents or biosimilars currently on the market but included drugs with authorized generics. The author reviewed news articles and other online sources to exclude approved therapeutic equivalents that have not yet reached the market. The author used the FDA’s orphan drug designation and approval search tool to eliminate orphan drugs that have no additional indications beyond those with orphan status.
To determine drugs that meet the small biotech drug exclusion criteria, the author used the 2021 Medicare Part D spending data to calculate the total expenditures for each manufacturer. The author estimated total Medicare Part D expenditures using the 2021 data reported by the Medicare Payment Advisory Commission in its 2023 “Medicare Payment Policy” report to Congress. The author also confirmed that the drugs included were not plasma-derived or below the expenditure thresholds and used the drug manufacturers’ websites to determine common conditions treated by each drug.
The author thanks Sarah Kaminer Bourland at Patients for Affordable Drugs for her insights and feedback. The author also thanks Sam Hughes for his contributions.
The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.
Policy Analyst, Health