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A landmark price negotiation between pharmaceutical companies and Medicare will result in price slashes for 10 common medications taken by older Americans ultimately saving taxpayers an estimated $6 billion next year, the Biden administration announced on Thursday.
Medications widely used to treat diabetes, Crohn’s disease, heart disease, rheumatoid arthritis, psoriasis and more will see significant price reductions.
The Biden administration estimates it will save Medicare beneficiaries, people over the age of 65 who participate in the federal health program, $1.5 billion in out-of-pocket costs and taxpayers $6 billion when it goes into effect in 2026.
The announcement is the result of year-long price negotiations between the government and pharmaceutical companies – it is the first time Medicare has the power to negotiate drug prices thanks to the Inflation Reduction Act, a flagship policy of the Biden administration that was signed into law in 2022.
“For years, millions of Americans were forced to choose between paying for medications or putting food on the table, while Big Pharma blocked Medicare from being able to negotiate prices on behalf of seniors and people with disabilities. But we fought back – and won,” President Biden said in a statement.
Reducing prescription drug costs has been a goal of the Biden administration over the last three years. The passage of the landmark legislation known as the Inflation Reduction Act provided a pathway for the Biden administration to do this.
Under the Inflation Reduction Act, Medicare can negotiate with participating pharmaceutical companies to lower certain drug prices and drugmakers must pay rebates to Medicare if they raise the price of a medication faster than the rate of inflation.
The lower prices could help prevent older Americans’ monthly premiums from increasing by capping out-of-pocket drug costs.
In the first quarter of 2024, the Department of Health and Human Services estimated that more than 260,000 people who have high drug costs benefitted from having their out-of-pocket drug costs capped at $3,500. That means they will not pay out-of-pocket costs for the remainder of the year.
More people will benefit from the capped cost in 2025 when everyone with Medicare Part D will have their out-of-pocket costs capped at $2,000.
The Medicare Part D program helps beneficiaries pay for prescription drugs by covering brand-name and generic medications as well as biological drugs like insulin. Millions of Americans benefit from the program per year.
Approximately nine million Medicare enrollees use one of the 10 drugs selected for negotiation.
More medications are expected to be added to the list of negotiated prices each year. Medicare will select an upmost of 15 other drugs covered under Part D for negotiations in 2025, up to 15 Part B and D drugs in 2026 and up to 20 drugs each year after that.
The Biden administration said that had the new prices been in effect last year, it would have saved an estimated $6 billion.
A full list of the negotiated drugs and prices can be found here.
