Last week, the Centers for Medicare and Medicaid Services (CMS) announced the selection of 15 drugs for the third round of negotiations under the Medicare Drug Price Negotiation Program. The program, established by the Inflation Reduction Act (IRA), requires CMS to identify a number of drugs available for negotiation—10 and 15 drugs in the first and second cycles, and 15 drugs in the third cycle.
The drugs selected in the third round are: Trulicity, Biktarvy, Orencia, Cosentyx, Erleada, Kisqali, Entyvio, Verzenio, Botox, Lenvima, Xolair, Rexulti, Xeljanz, Anoro Ellipta and Cimzia. One of the drugs, Tradjenta, is up for renegotiation.
How the negotiation process works
Under that law and subsequent amendments, drugs in the third round of negotiations or renegotiations must be single-source drugs without generic or biosimilar competition and cannot include certain orphan drugs or plasma products, or drugs subject to the small biotech exception. The 15 eligible drugs with the highest total Medicare expenditures were selected for negotiation based on a combination of cost and number of beneficiaries taking the drugs.
The 15 eligible drugs with the highest total Medicare spending were selected for negotiation.
The negotiation process results in a negotiated price, known in regulations as the maximum fair price (MFP), which is the amount of the drug that all Part D plans or original Medicare Part B and Medicare Advantage plans pay for a Part B drug.
Negotiation can lead to significant cost savings
The CMS announcement states that if the prices reached in the second round of negotiations take effect in 2024, the negotiated prices will save approximately $12 billion in net covered prescription drug costs.
People with Medicare may not see immediate relief
It is important to note that these negotiations are intended to reduce the cost of these drugs across the Medicare program and may or may not result in cost-sharing reductions for any particular individual. Whether a beneficiary's cost-sharing for a negotiated drug is lower than it was before the negotiation depends on a number of factors: (1) the price for the drug that the individual plan had negotiated prior to the plan-wide negotiation, (2) the plan formulary tier in which the drug was placed in prior years and the first year in which the maximum fair price was applied, and (3) the cost-sharing structure adopted by the plan.
Whether beneficiaries' cost sharing for a negotiated drug is lower than before the negotiation depends on a variety of factors.
Particularly for very high-use drugs, negotiating even a small reduction in overall price may result in significant program savings—in hopes of reducing or slowing premium increases—but with little or no change in the deductible for that drug on some plan formularies.
IRA changes continue to lower costs
Since the law was passed, the IRA has made other changes to health insurance affordability that have taken effect. This includes caps on insulin costs, better access to low-income assistance and caps on out-of-pocket costs for beneficiaries' Part D spending.
Medicare Rights will continue to advocate for better access to affordable, quality care and lower drug prices for seniors and people with disabilities. We urge policymakers to expand the success of IRAs and reduce costs across the health system.
Read more about the Negotiation Plan here.
