Last week, the Centers for Medicare and Medicaid Services (CMS) announced the selection of the group of 15 drugs for the third cycle of negotiations under the Medicare Drug Price Negotiation Program. This program, established by the Inflation Reduction Act (IRA), requires CMS to identify a number of drugs for negotiation–10 and 15 drugs in the first and second cycles, and 15 for this third cycle.
The drugs selected for the third round are: Trulicity, Biktarvy, Orencia, Cosentyx, Erleada, Kisqali, Entyvio, Verzenio, Botox, Lenvima, Xolair, Rexulti, Xeljanz, Anoro Ellipta, and Cimzia. One drug, Tradjenta, will be renegotiated.
How the Negotiation Process Works
Under the law and subsequent amendments, the drugs for the third cycle of negotiation or for renegotiation must be single source drugs for which there is no generic or biosimilar competition, cannot include certain orphan drugs or plasma products, or drugs subject to a small biotech exception. The eligible drugs with the 15 highest total Medicare expenditures due to a combination of cost and the number of beneficiaries who take the medication are selected for negotiation.
The eligible drugs with the 15 highest total Medicare expenditures are selected for negotiation.
The negotiation process results in a negotiated price, called the Maximum Fair Price (MFP) in the statute, which is the amount that all Part D plans or Original Medicare Part B and Medicare Advantage plans, for Part B drugs, pay for the drug.
Negotiation Leads to Significant Savings
The CMS announcement notes that, if the prices arrived at in the second round of negotiations had been in effect in 2024, the negotiated prices would have saved an estimated 12 billion dollars in net covered prescription drug costs.
People With Medicare May Not See Immediate Reductions
It is important to note that these negotiations serve to reduce the cost of these drugs across the Medicare program and may or may not result in reduced cost sharing for any particular individual. Whether a beneficiary’s cost sharing for a negotiated drug is lower than it was prior to negotiation depends on a number of factors: (1) the price the individual’s plan had already negotiated for the medication prior to the program wide negotiation, (2) the tier of the plan’s formulary that the drug was placed on in prior years and in the first year of the application of the Maximum Fair Price, and (3) the cost sharing structure that the plan utilizes.
Whether a beneficiary’s cost sharing for a negotiated drug is lower than it was prior to negotiation depends on a number of factors.
Particularly for very high utilization medications, even modest negotiated reductions in total price may result in significant programmatic savings—hopefully reducing or slowing the growth of premiums—but minor or no changes to copayment amounts for that medication in the formularies of some plans.
IRA Changes Continue to Lower Costs
The IRA made other changes to Medicare affordability that have taken effect in the years since the law was passed. This includes caps on the cost of insulin, better access to low-income assistance, and an out-of-pocket cap on beneficiary Part D spending.
Medicare Rights will continue to advocate for better access to affordable, high-quality care and lower drug prices for older adults and people with disabilities. We urge policymakers to expand on the IRA’s success and bring down costs across the health system.
Read more about the negotiation program here.
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