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The Biden administration reached a deal with pharmaceutical companies to lower the cost for some of the most popular and expensive drugs under Medicare.

In an Aug. 15 announcement unveiling the final negotiated prices, officials said they were able to secure discounts ranging from 38% to 79% off list prices for medications used to treat conditions such as heart diseases, diabetes and cancer.

Once they go into effect in 2026, seniors and other Medicare Part D enrollees are expected to save $1.5 billion in out-of-pocket costs in the first year. It’s also projected to save Medicare $6 billion in year one.

U.S. Department of Health and Human Services Secretary Xavier Becerra said in a statement, “Americans pay too much for their prescription drugs. That makes today’s announcement historic. For the first time ever, Medicare negotiated directly with drug companies and the American people are better off for it. … Empowering Medicare to negotiate prices not only strengthens the program for generations to come, but also puts a check on skyrocketing drug prices.”

According to the Centers for Medicare & Medicaid Services, the negotiated prices for the drugs based on a 30-day supply are:

• Eliquis, a blood thinner from Bristol Myers Squibb and Pfizer: $231, down from $521.
• Xarelto, a blood thinner from Johnson & Johnson; $197, down from $517.
• Januvia, a diabetes drug from Merck: $113, down from $527
• Jardiance, a diabetes drug from Boehringer Ingelheim and Eli Lilly: $197, down from $573.
• Enbrel, a rheumatoid arthritis drug from Amgen: $2,355, down from $7,106.
• Imbruvica, a drug for blood cancers from AbbVie and Johnson & Johnson: $9,319, down from $14,934.
• Farxiga, a drug for diabetes, heart failure and chronic kidney disease from AstraZeneca: $178, down from $556.
• Entresto, a heart failure drug from Novartis: $295, down from $628.
• Stelara, a drug for psoriasis and Crohn’s disease from J&J: $4,695, down from $13,836.
• Fiasp and NovoLog, diabetes drugs from Novo Nordisk: $119, down from $495.

‘A promise to the American people’

The lower prices are the result of months of negotiations between the federal government and drugmakers over medications as part of the new Medicare Drug Price Negotiation Program.

Designed to address rising health care costs, the initiative is part of President Joe Biden’s signature Inflation Reduction Act. By allowing Medicare to have a say in setting drug prices for the first time in its six-decade history, the White House believes it will provide relief to the 9 million seniors who are currently paying up to $6,497 in out-of-pocket costs per year.

In August 2023, the U.S. Department of Health and Human Services announced the first 10 drugs covered under Medicare Part D for the first cycle of negotiations, which included medications from some of New Jersey’s biggest pharmaceutical companies.

According to CMS, the selected drugs “are among those with the highest total spending” in Medicare Part D, with seniors paying $3.4 billion in out-of-pocket costs in 2022. Additionally, the selected drugs accounted for $50.5 billion in total Part D gross covered prescription drug costs, or about 20% of total Part D gross covered prescription drug costs between June 1, 2022 and May 31, 2023, the administration said.

Although taking part in the negotiation process is voluntary, companies that choose not to engage face the prospect of paying excise taxes or terminating their relationships with Medicaid.

Two months after the initial list was issued, CMS said all companies that make the drugs opted to take part in negotiations – even though most of them sued the administration.

In an Aug. 15 statement, CMS Administrator Chiquita Brooks-LaSure said, “These negotiations will not only lower the prices of critically important medications for cancer, diabetes, heart failure, and more, but will also save billions of dollars. Medicare drug price negotiation and the lower prices announced today demonstrate the commitment of CMS and the Biden-Harris Administration to lower health care and prescription drug costs for Americans. We made a promise to the American people, and today, we are thrilled to share that we have fulfilled that promise.”

Over the next four years, the government-run health insurance plan will negotiate prices for up to 60 drugs covered under Part D and Part B and up to an additional 20 medications every year after that.

Biden called the new negotiated prices a “historic milestone” made possible because of the IRA.

“We showed that major progress can be made for the American people when we work together to take on special interests, even as Big Pharma continues to go to court to try to block lower prices for consumers. But the Vice President and I are not backing down. We will continue the fight to make sure all Americans can pay less for prescription drugs and to give more breathing room for American families,” the Democratic president said in a statement.

However, the outcome could be jeopardized if the drugmakers succeed in their lawsuits to block the law, which have been unsuccessful so far.

While the cases vary in detail, each allege that the government is overreaching in its authority. They mostly hinge on whether the program is constitutional under the First and Fifth amendments. They also say allowing Medicare to negotiate prices would lead to lower profits, causing reduced spending in research and development.

Six of the 15 lawsuits – including those from Johnson & Johnson in New Brunswick, Bristol Myers Squibb in Princeton and Novo Nordisk in Plainsboro – have been dismissed, upholding the Biden administration’s right to negotiate.

Other New Jersey pharma giants have also taken legal action over the drug pricing requirements, including Merck & Co. in Rahway and Novartis Pharmaceuticals in East Hanover. Those suits are awaiting decisions from district courts.

Sounding off

In a statement to NJBIZ, a Johnson & Johnson spokesperson said, “The reality of the IRA’s government price setting for U.S. patients will be higher costs, and as seen in other countries with government dictated prices, restricted access and fewer medicines. Furthermore, the law’s arbitrariness and lack of standardized scientific approach in evaluating clinical evidence undervalues the benefit our medicines deliver to millions of patients.

“While seniors may see some benefit from out-of-pocket cost caps, patients’ access to provider-prescribed treatments should not be unfairly and unnecessarily restricted. We will continue to advance solutions that put patients first, protect provider-patient decision making, and bolster medical advancements,” J&J said.

A Novo Nordisk media representative said, “We remain opposed to government price setting through the IRA and have serious concerns about how the law is being implemented, including aggregating multiple products that individually would not meet the requirements of the statute.”

Despite appealing its IRA lawsuit ruling, Novo said it will ensure the maximum fair price for a 30-day supply is made available by January 2026 as required by statute.

“Unfortunately, were we to reject the MFP, the IRA would require us to either remove all Novo Nordisk medications from Medicare and Medicaid, which would have significant negative impact on patients, or incur exorbitant excise tax penalties of up to 95% of a selected drug’s sales,” the drugmaker said. “As we learn more about the impact of price-setting on the Part D market, we will continue to keep patients at the center of our decisions.”

Bristol Myers Squibb, which makes blood thinner Eliquis, the most prescribed medicine on the list of drugs subjected to negotiations, said the new MFP “does not reflect the substantial clinical and economic value of this essential medicine, which is widely recognized for its effectiveness in reducing stroke-related events, hospitalizations and extended rehabilitation needs.

“The MFP is the price Medicare will pay for Eliquis and does not set what Medicare patients will pay for Eliquis now or in the future. Insurance plans and their pharmacy benefit managers are ultimately responsible for what patients will pay … and the IRA does not protect patients from potential increases to their cost sharing or restrictions in access to Eliquis once the MFP goes into effect in January 2026. By focusing on government price setting, the IRA overlooks the biggest problem in patient affordability: how plans determine patient out-of-pocket costs,” BMS said.

The company added, “Bristol Myers Squibb strongly advocates for uninterrupted access to Eliquis and urges insurance plans and their pharmacy benefit managers to continue to make Eliquis available to patients without increasing out-of-pocket costs or imposing other barriers to accessing this medicine. We will continue to support holistic policies that enhance affordability and access for patients without compromising future medical innovations.”

The HealthCare Institute of New Jersey, a trade association representing research-based pharmaceutical and medical technology companies, issued a statement saying, “Government price controls are not the way to lower health care costs. These price controls run counter to America’s longstanding global leadership on innovation – be it new treatments and cures, space exploration, computers, nanotechnology or cutting-edge medical devices. While we all agree we want to reduce patient cost, price controls stifle advances. Polices that ensure manufacturer rebates are passed along to the patient must be enacted to lower drug costs.”

A spokesperson for Merck told NJBIZ, “We disagree that the MFP for Januvia is a fair market price that accurately reflects the value of Januvia. We remain concerned that the IRA’s price-setting policy will have a significant chilling effect on future innovation and research investment, which will ultimately impact patient access to new medicines and cures.”

Editor’s note: This story was updated at 3:58 p.m. ET Aug. 15, 2024, to include a statement from Merck.