The lowered drug prices negotiated between the Biden administration and major pharmaceutical companies and announced Thursday are leaving industry observers skeptical about the extent of savings and benefits to patients.
The US government expects Medicare to save $6 billion on the 10 high-cost medications selected for the first round of negotiations with drugmakers. The government also projects patients will save $1.5 billion from the deals, claiming victory over some of the costliest drugs for treating heart failure, diabetes, and other conditions.
Yet the true extent of savings remains murky because the government is comparing a drug’s negotiated price against its list price, which the government wasn’t previously paying.
Drugmakers already negotiate discounts for their products with companies running Medicare drug plans. In announcing the negotiated list prices that will go into effect in 2026, the government wouldn’t disclose the net prices previously paid for the drugs.
The program, passed into law by the 2022 Inflation Reduction Act, is a key plank in Democrats’ efforts to fight ever-escalating health costs and drastically reduce the prices of drugs the Medicare program spends the most on. The first phase of the negotiation cycle, which largely concluded with Thursday’s announcement, has been aggressively opposed by drugmakers, who have sued to block the program claiming it’s unconstitutional and stifles innovation.
Department of Health and Human Services chief competition officer Stacy Sanders said in an interview Thursday that lining up the list price against the negotiated prices was “an appropriate benchmark.”
“It is appropriate for people with Medicare to see how much we are saving relative to the prices that the manufacturers set. And those savings are 38% to 79% across the 10 drugs,” Sanders said. “The list price is a publicly available price, and it is the manufacturer’s price. The list price drives prices throughout the health-care market.”
- However, John Stanford, executive director at Incubate, a group of early stage life science investors, said that “showing the savings off the list price is the oldest game in town for beating up on the pharmaceutical industry, and that’s exactly what they’ve done.”
- “Ultimately, we don’t know how much they saved,” Stanford said. He expressed skepticism as to whether patients would ultimately save money as well, noting that copays and premiums will ultimately complicate matters.
- Adding to concerns about the actual size of the government’s savings are claims by the drug industry that the negotiations process negatively affects beneficiaries.
- Steve Ubl, president and CEO of the industry group Pharmaceutical Research and Manufacturers of America, said in a statement that “patients will be disappointed when they find out what it means for them.”
The pharmaceutical industry group, which joined many of the drugmakers in suing the administration over the program, has launched a campaign against PBMs to point the finger at them for high drug costs.
Reid expressed similar concerns over PBMs, noting they would “play games to discourage use of these medicines, to push people toward medicines where the PBMs may be getting bigger rebates that may give them more financial flexibility.”
A Milliman report from June, backed by PhRMA, noted that around 3.5 million beneficiaries that use drugs in the negotiation process were expected to see out-of-pocket increases.
The negotiations will continue with an annual process slated to include more medications in future years, but the complexities surrounding the final savings numbers cast a shadow on the program’s initial success.
For more details, you can refer to the full article on Bloomberg Law.