Medicare drug price negotiations begin, as CMS sends initial offers to top drugmakers

The Biden administration has taken the first step in its program to allow Medicare to negotiate prices for 10 of the costliest prescription drugs. On February 1, it sent its opening offers to drugmakers.

“Throughout the negotiation process, the Centers for Medicare & Medicaid Services is dedicated to improving access to some of the most expensive drugs for people with Medicare while encouraging market competition and fostering innovation,” CMS Administrator Chiquita Brooks-LaSure said. “Because of President Biden’s Inflation Reduction Act, people with Medicare prescription drug coverage who have very high drug costs will have their costs capped for the first time ever, which will be especially important for many of the people who take the 10 drugs selected for the first cycle of negotiations.”

The initial 10 medications, which the Department of Health and Human Services announced last August, accounted for about 20% of total spending for Medicare Part D prescription drugs over the past year, officials said HHS announced last October that manufacturers of all 10 selected drugs agreed to participate in negotiations with Medicare.

Drugmakers that received opening offers include Bristol-Myers Squibb, Johnson & Johnson, Boehringer Ingelheim, Merck, AstraZeneca, Novo Nordisk, Amgen, Janssen, Novartis and AbbVie. Offers will not be made public unless a manufacturer chooses to disclose information about the talks, an administration official said.

Companies have until March 2 to either accept the government’s offer or make a counteroffer. Negotiations will continue over the next several months and end by August 1. If a maximum fair price is agreed upon by the participating drug company and Medicare, those new prices will take effect in Medicare beginning in 2026. Five Wall Street analysts and two investors told Reuters they expect the negotiations to result in cuts ranging from the statutory minimum of 25% to 60% when final numbers are set in September.

However, legal battles over the program continue as negotiations begin. Drug companies and their industry allies have filed nine lawsuits challenging various aspects of the federal law. The Pharmaceutical Research and Manufacturers of America, a trade group representing drug manufacturers, has argued that federal efforts to implement price negotiations have lacked transparency, discounted patients’ input and could reduce drug industry investments to research lifesaving cures.

Related: Medicare’s 1st-ever drug price negotiations are about to begin, as legal battles persist

“This continues to be an exercise to win political points on the campaign trail rather than do what’s in the best interest of patients,” said Alex Schriver, senior vice president of public affairs at PhRMA.