The Centers for Medicare & Medicaid Services (CMS) took a historic step forward in its plans to negotiate the prices of Medicare's most costly prescription drugs by naming the first 10
up for negotiation on Tuesday.
The list of drugs to be negotiated includes:
- Apixaban (Eliquis): a blood thinner used to prevent stroke and blood clots
- Empagliflozin (Jardiance): a drug used to treat type 2 diabetes and heart failure
- Rivaroxaban (Xarelto): a blood thinner used to treat and prevent blood clots and reduce risks for patients with coronary or peripheral artery disease
- Sitagliptin (Januvia): a drug for treating type 2 diabetes
- Dapagliflozin (Farxiga): a drug for treating type 2 diabetes, heart failure, and chronic kidney disease
- Sacubitril/valsartan (Entresto): a drug for patients with chronic heart failure
- Etanercept (Enbrel): a drug for moderate to severe rheumatoid arthritis
- Ibrutinib (Imbruvica): a drug that is used to treat chronic lymphocytic leukemia/small lymphocytic lymphoma
- Ustekinumab (Stelara): a biologic that treats Crohn's disease, ulcerative colitis, psoriasis, and psoriatic arthritis
- Insulin aspart injection (NovoLog, among others): a drug for patients with diabetes mellitus
A 2003 law that expanded Medicare's prescription drug coverage also blocked CMS from negotiating drug prices. Under the landmark 2022 Inflation Reduction Act (IRA), CMS gained that authority for the first time.
"Today, my administration announced the first 10 Medicare Part D drugs that have been selected for price negotiation -- for the first time ever," Biden said. "We've reached this milestone because of the Inflation Reduction Act -- one of the most significant laws ever enacted, and one that passed with the leadership of Democrats in Congress."
Once implemented, the negotiated prices will lower costs for up to 9 million seniors, currently paying up to $6,497 in out-of-pocket costs annually for their medications, the president noted.
On top of the savings for seniors, the Congressional Budget Office estimates that the combined negotiation provisions and inflation rebate provisions of the IRA -- drugmakers must pay rebates to the federal government if they hike their prices above the level of inflation -- will save taxpayers $160 billion through reductions to Medicare spending.
The negotiations are slated to begin in 2023 and continue in 2024. Negotiated prices would then take effect at the start of 2026. Already, pharmaceutical companies and other industry players have filed as many as eight lawsuits to try to block or delay the negotiations from advancing, and more are expected.
The First Drugs Chosen for Negotiation
The 10 drugs chosen by CMS -- single-source brand-name drugs with no therapeutically equivalent generic or biosimilar competition -- were targeted for negotiation based on their total expenditures in the Medicare Part D program. These drugs are either costly, widely used, or both.
In terms of total Medicare Part D costs over the last year (June 2022 to May 2023), apixaban cost the most, at $16.5 billion for the 3.7 million enrollees taking the medication (total cost of $4,448 per enrollee). This was followed by empagliflozin ($7.1 billion), rivaroxaban ($6.0 billion), and sitagliptin ($4.1 billion).
The highest cost per enrollee went to ibrutinib ($133,178, with 20,000 enrollees over the previous year), followed by ustekinumab ($119,951, with 22,000 enrollees), and etanercept ($58,148, for 48,000 enrollees).
To be eligible for negotiation, drugs must be 7 years out from their FDA approval or licensure date for small-molecule drugs, or 11 years out for biologics, as of the date that the selected drugs list is published.
Senior administration officials, who spoke on background during a press call on Tuesday morning, said CMS "selected the 10 highest-spending drugs that qualify under the process that was described in the statute and the CMS program instruction."
The agency first identified the qualifying drugs under Medicare Part D as having been on the market for 7 to 11 years without competition, an official explained. Some drugs were excluded, including certain orphan drugs, low-spend drugs, or plasma-derived products.
"From there, we identified and ranked the top 50 qualifying single-source drugs with the highest gross costs to Medicare Part D, to determine the list of negotiation-eligible drugs ... and then finally from that, CMS selected the 10 highest-ranked negotiation-eligible drugs," the official said.
For the most part, experts said they anticipated that most of the drugs selected would be up for negotiation.
There were a "couple surprises," however, said Kelsey Lang, a principal in health policy at Avalere, a healthcare consulting firm based in the Washington, D.C.-Baltimore area. She attributed discrepancies between experts' predictions and the agency's list to differences in the data used in each of their analyses.
Dapagliflozin, sacubitril/valsartan, and ustekinumab seem to have jumped in spending, based on public data, which made them eligible for negotiation, she told MedPage Today in a phone interview during which a press representative was present.
Richard Frank, PhD, a senior fellow and director of the Brookings Schaeffer Initiative on Health Policy at the Brookings Institution, noted that "there are a bunch of drugs that have been on the market for a long time that have carried super high prices and have made tons of money, and I think those are the candidates where you can give taxpayers and consumers a real break, without really threatening the profitability of the product."
Apixaban has had global sales of $91 billion since it launched in 2013, he said. Even factoring in the cost of development -- roughly $3.5 billion -- there is still a significant amount of money to be made, he pointed out.
Adalimumab (Humira), an expensive biologic used to treat plaque psoriasis, was one drug some experts thought might be chosen for negotiation. A biosimilar adalimumab-atto (Amjevita) launched in January, but has not seen a great deal of uptake.
Frank suspects CMS saw "enough potential for competition that they kept it off the list."
A senior administration official on the press call said that "any of the drugs that you might have expected to see on the list that aren't selected here could be selected in future years under the exact same process."
Asked what impact price negotiations would have for patients, Madelaine Feldman, MD, vice president of advocacy and government affairs for the Coalition of State Rheumatology Organizations, told MedPage Today that patients often tend not to reap the benefits of drug pricing reforms.
However, because drug price negotiation has been paired with a $2,000 cap on annual out-of-pocket spending, expected to take effect in 2025, she said she is more optimistic.
"Someone's going to have to make up that difference that the patients used to pay," she said. And because much of the burden has shifted to Part D plans, they may be more incentivized to start putting lower priced drugs on their formularies, she added.
What Happens Next?
This fall, CMS will invite drug companies whose drugs have been selected for negotiation to meet with the agency regarding their data submissions. The agency will also host patient-focused listening sessions on the selected drugs.
Drug companies selected for the program will have until October 1 to sign an agreement to participate in the negotiation process for 2026, according to a timeline published by CMS on its Medicare Drug Price Negotiation Program.
By no later than October 2, those same companies must submit "manufacturer-specific data" to CMS that the agency will factor into its consideration of what is a "maximum fair price." These data may include costs of research and development, production costs, and sales and revenue data.
This date is also the deadline for the public to submit data to the agency regarding therapeutic alternatives to the selected drugs, as well as data on "unmet medical need" and impact on specific populations, according to an agency fact sheet.
By Feb. 1, 2024, CMS will share its initial maximum fair price offers with a justification, and companies will have 30 days to accept or suggest a counter-offer.
The negotiation period is slated to end Aug. 1, 2024. By September 1, CMS will publish the maximum fair prices that the agency has negotiated for these 10 drugs, and the negotiated prices will take effect beginning Jan. 1, 2026.
Looking ahead, CMS will choose up to 15 additional drugs for price negotiation for 2027, up to 15 more drugs (to include drugs covered under Medicare Part B) for 2028, and up to 20 more drugs for price negotiation each year after that, as stated in the IRA.
In addition to allowing Medicare to negotiate drug prices, the IRA looks to lower healthcare costs in other ways, including capping annual out-of-pocket expenses for Medicare Part D drug plans at $2,000, requiring drugmakers to cough up federal rebates if they hike prices above inflation levels, and maintaining the enhanced tax credits for those with Affordable Care Act coverage.
Reactions and Expected Backlash
Nancy LeaMond, executive vice president and chief advocacy and engagement officer of the AARP (formerly known as the American Association of Retired Persons), praised the administration for taking action to "bring down out-of-control prescription drug prices."
"For too long, big drug companies have fleeced our country and padded their profits by setting outrageous prices, all at the expense of American lives," LeaMond said in a statement to press. "The number one reason seniors skip or ration their prescriptions is because they can't afford them. This must stop."
"We cannot overstate how monumental this law is for older Americans' financial stability and overall health," she added.
Pharmaceutical companies have already taken aim at the new law by launching a "blizzard of lawsuits" to try and block it, including AstraZeneca, Astellas, Bristol Myers Squibb, Johnson & Johnson, and Merck, as well as the drug industry's trade group, the Pharmaceutical Research and Manufacturers of America.
"Today is a regrettable milestone in the implementation of the Inflation Reduction Act's price control provisions, which will result in harmful reductions in biomedical innovation while failing to address the root causes of high out-of-pocket costs," said John Stanford, executive director of Incubate, a group of venture capital firms, in an emailed statement.
"Government price setting throws a wrench in the successful market-based drug development ecosystem that patients count on to deliver life-saving therapies," he added. "The uncertainty created by price controls will force many early-stage life sciences investors to direct their funds elsewhere."
https://www.medpagetoday.com/washington-watch/washington-watch/106102