After a year of negotiations, the Biden administration and federal health officials announced agreements with drug makers in August to lower prices on 10 of the most expensive and most commonly prescribed drugs for Medicare members.
The negotiations came as a result of the Inflation Reduction Act (IRA) of 2022. Previously, federal officials could not negotiate with drug makers under a deal Congress reached when it passed Medicare’s Part D prescription drug program in 2003, Ricardo Alonso-Zaldivar reported for AP.
After the new prices take effect on Jan. 1, 2026, the Medicare program will save $6 billion in the first year. Some 9 million Medicare Part D members who took these 10 drugs in 2023 will save $1.5 billion, the federal Department of Health and Human Services (HHS) said. The announcement produced extensive coverage, including from NPR, Reuters and the Associated Press.
Story angles to consider:
- Many Medicare members struggle to afford their medications, including people of color and those with low incomes.
- How much consumers will save with the new prices.
- The prices consumers pay for all prescription drugs remain high; those costs and low levels of health literacy cause Medicare beneficiaries to fail to comply with their physicians’ prescription drug orders, called “nonadherence” or “noncompliance.”
The burden of high drug costs
Despite new savings on the 10 drugs, more than 5 million Medicare members struggle to afford their prescription medications, and Black and Latino beneficiaries are most likely to have such trouble, according to a report from the office of the Assistant Secretary for Health Planning and Evaluation at HHS.
Medicare beneficiaries with lower incomes and those under 65 who qualify for Medicare due to a medical condition had rates of not taking needed medications due to cost at 1.5 to 2 times that of whites, the report showed.
While Medicare’s drug costs will be lower, Medicare members will still pay out of pocket for medications at the pharmacy, which can add up quickly.
“Most seniors who max out their out-of-pocket contributions can expect to pay between $3,300 and $3,800 on prescription drugs,” according to Aaron E. Carroll, M.D., president and CEO of the health policy group AcademyHealth. But starting in 2025, another provision of the IRA will go into effect: a $2,000 cap on out-of-pocket costs for all Medicare members, he wrote in a column for The New York Times.
Carroll’s estimate of $3,300 to $3,800 for seniors’ out-of-pocket costs comes from this report from the federal Centers for Medicare and Medicaid Services.
Journalists should note, however, that Medicare members who take some of the 10 highest-cost drugs in the price-negotiation program paid as much as $6,497 out of pocket each year for their medications, according to this ASPE HHS report from last year.
How much consumers will save
In a detailed report, the federal Centers for Medicare and Medicaid Services (CMS) listed the 10 drugs by name, including these important facts on each one: the drug maker, commonly treated conditions, negotiated prices for 2026, list prices in 2023, percentage savings, the discount as a percentage, how much CMS paid in total in 2023 and the number of members who took the drug.
The 10 drugs are:
- Eliquis (Bristol Myers Squibb and Pfizer), for preventing strokes and blood clots.
- Enbrel (Amgen), for autoimmune conditions.
- Entresto (Novartis), for heart failure.
- Fiasp and NovoLog (Novo Nordisk), insulin for diabetes.
- Farxiga (AstraZeneca) for diabetes, heart failure and chronic kidney disease.
- Imbruvica (AbbVie and Johnson & Johnson), for blood cancers.
- Januvia (Merck), for diabetes.
- Jardiance (Boehringer Ingelheim and Eli Lilly), for diabetes, heart failure and chronic kidney disease.
- Stelara (Johnson & Johnson), for autoimmune conditions.
- Xarelto (Johnson & Johnson), for preventing strokes and blood clots.
Here’s a hypothetical example of how the price negotiations would affect a Medicare beneficiary taking Stelara for Crohn’s disease or ulcerative colitis, according to a fact sheet from the White House.
At the pharmacy, a Medicare member pays 25% of the drug’s price in coinsurance, or about $3,400 for a 30-day supply now. When the negotiated price goes into effect in 2026, that same 25% coinsurance would cost the beneficiary about $1,100 before the member reaches the catastrophic cap. When a member hits this cap, he or she would pay no more out of pocket on prescription drugs, although the fact sheet added that all beneficiaries’ actual costs vary depending on the design of their benefit plans.
The problem of nonadherence
High drug costs lead to nonadherence, affecting senior’s health negatively. One in five Medicare recipients reported not taking their medications properly due to costs, a study in JAMA showed.
In that study, Stacie B. Dusetzina, Ph.D., a professor of health policy at the Vanderbilt University School of Medicine, and colleagues found that some Medicare recipients had to forgo basic needs or go into debt to afford medications. Eight in 10 of those with cost-related nonadherence said if the actual cost of a drug was higher than estimated, they may not fill a prescription or stop taking it, the researchers wrote.
Medicare members are more likely than younger Americans to need several medications, due to multiple chronic conditions such as high cholesterol, diabetes and heart disease, according to the CDC.
If Medicare members also need any of the most costly medications, they may be forced to choose between paying for their drugs or skipping them altogether, according to a KFF analysis. About 90% of older adults take more than one prescription medication, compared with 75% of adults 50 to 64, and 50% of those 30 to 49. KFF noted.
Nonadherence is “a major public health problem with numerous implications, both for an individual’s health and population health,” according to this report in the Mayo Clinic Proceedings. More than half of adults don’t adhere to medication protocols, leading to some 125,000 deaths and as much as two-thirds of hospital admissions annually, the report noted.
Looking ahead, drug makers could file legal challenges against the IRA given that they did so after Congress passed the law (as shown in this litigation tracker). More lawsuits are possible under a recent U.S. Supreme Court ruling that could limit the authority of federal agencies to regulate health policy, as this KFF report explains.
Resources
- CMS Should Do More To Fulfill The IRA’s Promise To Lower Drug Costs For Patients, Health Affairs Forefront, Aug. 12, 2024.
- HHS names first 10 drugs for price negotiations under the Inflation Reduction Act, AHCJ’s Covering Health, Aug. 29, 2023.
