Some of the most widely used drugs in the U.S. may be heading for lower prices under Medicare, a move that could save taxpayers billions of dollars and squeeze profits for big pharmaceutical companies.
The U.S. government is preparing to release a list this week of 10 drugs that the health program for the elderly will be able to negotiate prices for — one of the key elements of President Joe Biden's signature Inflation Reduction Act. Analysts expect Johnson & Johnson's Xarelto blood thinner and Eli Lilly's Jardiance for diabetes to be among the medications chosen.
The ability for the government to haggle over prices is a marked change for pharma companies that have long been able to charge
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For taxpayers, the
"They're going to earn less money," said Spencer Perlman, an analyst with policy research firm Veda Partners. "That's just a fact."
Medicare spends more than $200 billion on outpatient prescription drugs annually. Eliquis, the Bristol-Myers Squibb blood thinner used to prevent heart attacks and strokes, cost the program more than $12 billion in 2021 alone.
Under the IRA, the price ceiling for a selected drug will be set somewhere between 75% and 40% of its average price, with steeper discounts for drugs that have been on the market longer. Medicare will halve its costs for the chosen drugs on average, according to Congressional Budget Office estimates. That will
Complexities in the law make it hard to predict precisely which drugs will be affected. Analysts agree on some, but surprises
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The list is expected Tuesday, Politico reported, citing unnamed people involved. The White House is planning an event on lowering health-care costs Tuesday with Biden and Vice President Kamala Harris.
The process set in motion this week won't hit sales until 2026, and even then analysts suggest its
Each year, Medicare will add drugs to its low-cost shopping list,
Still, it's a sea change that pharma companies have dreaded.
"This misguided policy does not strike the right balance between incenting investment and innovation and improving affordability and access," Merck Chief Executive Officer Robert Davis said earlier this month on a call with analysts.
Big drugmakers have long fought to maintain their products' patent protection and forestall the
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The administration calls that a win for the taxpayers who fund Medicare and for
UK-based AstraZeneca Plc filed suit on Friday, arguing the IRA will
"You just have to start out with higher cash flows because you know in the out years you're going to have lower cash flows," Seigerman said.
Drugmakers are warning
Indeed, the CBO estimates that price negotiations and other measures in the IRA will lower the number of new drugs coming to market by about 1% over the next 30 years.
That isn't necessarily bad: The policy may encourage companies develop new, innovative products rather than their own versions of other companies' branded drugs, said Juliette Cubanski, deputy director of Medicare policy at KFF, a nonprofit health-policy research organization. And drugmakers may not fight generic competitors as vigorously, because drugs with generic equivalents are exempt from price negotiation.