HHS selects 10 drugs for government price setting under Medicare

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The Biden administration on Tuesday selected 10 drugs for a first round of price negotiation through Medicare, an unprecedented effort to flex federal purchasing power over the drug industry while courting backlash if pharmaceutical companies retreat from lifesaving cures.

Drugs on the list include Jardiance and other treatments for Type 2 diabetes, anti-blood clot drugs such as Xarelto, and medicine that targets autoimmune conditions, blood cancer, Crohn’s disease and arthritis.

Millions of seniors on Medicare take the selected drugs, which have limited competition and drive a large share of federal spending in the prescription drug benefit program known as Part D.

Congressional Democrats approved the negotiation program in President Biden’s signature bill last year, the Inflation Reduction Act, over the objections of Republicans who said interfering in markets would tip into socialism and inhibit research into new cures.

Under the program, the first round of negotiated prices will take effect in 2026. Pricing talks are scheduled for this year and into next year, and final prices will be published in the fall of 2024 — right before the presidential election.

Additional drugs from Medicare Part D and the doctor-administered Part B program will be selected in subsequent years.

“For far too long, Americans have paid more for prescription drugs than any major economy. And while the pharmaceutical industry makes record profits, millions of Americans are forced to choose between paying for medications they need to live or paying for food, rent and other basic necessities,” Mr. Biden said. “Those days are ending.”

The complete list of drugs selected were Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara and a series of insulins made by Novo Nordisk: Fiasp, Fiasp FlexTouch, Fiasp Penfill, NovoLog, NovoLog FlexPen and NovoLog PenFill.

The Department of Health and Human Services said the selected drugs accounted for $50.5 billion in total prescription drug benefit spending, or about 20% of total Part D costs, from June 1, 2022, to May 31. Officials said the drugs treat conditions common among the population served by Medicare.

The administration is supposed to consider manufacturing costs, revenue and sales in the U.S. and other factors when determining a “maximum fair price” for a selected drug.

Drug companies that refuse to participate in the negotiation process face an excise tax that begins at 65% of U.S. sales of the product, or they can withdraw medicine from Medicaid and Medicare coverage.

The Congressional Budget Office estimates that the drug negotiation program will save taxpayers $100 billion through 2031 while modestly curtailing the share of drugs coming to market by about 1%. Promoters say the program will reduce seniors’ out-of-pocket costs and could spill over into negotiations between employer plans and drugmakers, though benefits are questionable.

“There are significant savings to the Medicare program, but seniors pay out-of-pocket costs for prescription drugs,” said Neera Tanden, White House domestic policy adviser.

For “people who have out-of-pocket costs, this will deliver lower prices for them,” she said. “We don’t know what the negotiated price will be — this is subject to negotiation — so we can’t tell you the specific amount people will save.”

Once the new Medicare prices are published, other insurers might seek similar deals, Ms. Tanden said.

A Kaiser Family Foundation survey said the program is broadly popular, with 89% of Democrats and 77% of Republicans saying they support authorizing the federal government to negotiate prices of some prescription drugs for people with Medicare coverage.

Mr. Biden and Vice President Kamala Harris took a victory lap Tuesday at the White House.

They are spotlighting the program as a central plank of a 2024 reelection campaign to lift working Americans through “Bidenomics” and to reject “trickle-down” theories that favor tax breaks or other benefits for the wealthy and corporations.

“We’ve been fighting Big Pharma for a long time, a long, long time,” Mr. Biden said. “I promise you, I’m going to have your back and I’ll never stop fighting for you on this issue, nor will Kamala.”

The pharmaceutical industry and its allies aren’t finished fighting.

Drugmakers say the negotiation is more like extortion, and multiple drug companies and the U.S. Chamber of Commerce have filed lawsuits seeking to block the program.

Merck says the program violates Fifth Amendment protection against government seizure of property without just compensation. It also violates First Amendment doctrines by compelling drug companies to say their prices are fair, the company says.

Senior administration officials said drug companies were running to the courts to accomplish what they couldn’t in Congress and that nothing in the Constitution prevents Medicare from negotiating down drug prices.

More broadly, drugmakers say, government price controls will undercut their investments in research and development.

“It’s all wine and roses today — there’s no downside. What we know is there will be reduced investment and drug products pulled,” said Joel White, CEO of Horizon Government Affairs, who played a role in creating the Part D program as a key congressional staffer from 2001 to 2003.

The list from the Department of Health and Human Services sparked debate about the chosen drugs. Stelara, a Johnson & Johnson drug for Crohn’s disease, made the list even though it could face competition soon. Humira, another high-cost drug for the same condition, did not make the list.

Mr. White said Part D’s authors crafted a noninterference clause to prevent a political administration from picking winners and losers in the Medicare drug program.

“Here we have politicians, bureaucrats and lobbyists making decisions about what’s going to get on a list and be price-controlled,” he said. “When you have a product that has likely competition in the future and you have a high-spend product in Medicare that doesn’t make it on the list, there is a decision made.”

Officials said they closely adhered to the parameters outlined in the law and arrived at the final list. They also emphasized that other drugs will be added.

Still, the Pharmaceutical Research and Manufacturers of America, a key industry lobbying group, said the program was rushed and would threaten one of Mr. Biden’s top initiatives.

“Giving a single government agency the power to arbitrarily set the price of medicines with little accountability, oversight or input from patients and their doctors will have significant negative consequences long after this administration is gone,” CEO Stephen J. Ubl said. “Politics should not dictate which treatments and cures are worth developing and who should get access to them. The cancer moonshot will not succeed if this administration continues to dismantle the innovation rocket we need to get there.”

House Energy and Commerce Committee Chairwoman Cathy McMorris Rodgers, Washington Republican, said the negotiation program could lead to higher initial list prices, “potentially wiping out any savings to patients.”

After the initial round, the government will pick an additional 15 Part D drugs for price setting in 2025, 15 Part B and Part D drugs in 2026, and 20 more Part B and Part D drugs in subsequent years.

Some exclusions from the negotiation process are drugs with a generic or biosimilar available, small-molecule drugs less than nine years from the approval date and biological products that have been on the market for less than 13 years.

The Incubate Coalition, which informs policymakers about the role of venture capital in developing treatments, said the disparate treatment of categories is a flaw.

“Numerous biotech companies have already scaled back research into experimental small-molecule treatments due to the IRA’s arbitrary price-setting timelines,” coalition CEO John Stanford said. “Targeting small-molecule drugs for price controls earlier than biologics will force life sciences firms to reconsider a broad array of risky projects, including developing cutting-edge, small-molecule therapies for a range of diseases from cancer to Alzheimer’s.”

Patient advocates took the opposite view. They say lengthy exemption periods would make drugs too costly.

“The list shows instead how important it is to expand those negotiation powers. Several monopolized drugs that are expensive for Medicare today are exempted from price negotiation and will remain expensive,” said Peter Maybarduk, director of the Access to Medicines Program at Public Citizen. “One reason for this is a many-years-long grace period after a drug first comes to market. During those years, drugmakers will exploit patent monopolies with minimal checks on profiteering.”