CMS: Negotiated drug prices would have saved Medicare $6B last year

The Centers for Medicare & Medicaid Services offered the first look at the potential savings generated by the first crop of Medicare drug price negotiations.

On Thursday morning, the agency released data that show if the negotiated prices for the first 10 drugs in the program had been available last year, it would have generated an estimated $6 billion in savings for Medicare. That's savings of about 22% on those 10 products.

CMS will offer additional details on negotiations down the line, officials said on a call with reporters on Thursday, but they said the program led to price reductions of between 38% and 79% on the initial list of drugs.

On the highest end, negotiations led to a price decrease for Merck's Januvia, a diabetes drug, from $527 for a 30-day supply to $113, down 79%. CMS said 843,000 Medicare beneficiaries took Januvia in 2023, with the drug accounting for nearly $4.1 billion in spending.

“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,” said U.S. Department of Health and Human Services (HHS) Secretary Xavier Becerra.

Here's a look at savings for other drugs included in the program:

  • Fiasp and NovoLog insulins (Novo Nordisk): Reduced the cost of a 30-day supply from $495 to $119, a decrease of 76%.
  • Farxiga (AstraZeneca): List price for a 30-day supply decreased from $556 to $178.50, or 68%.
  • Enbrel (Immunex Corporation): Cut the list price for a 30-day supply by 67% from $7,106 to $2,355.
  • Jardiance (Boehringer Ingelheim): Reduced the cost of a 30-day supply by 66%, or from $573 to $197.
  • Stelara (Janssen): The list price for a 30-day supply dropped from $13,836 to $4,695 or by 66%.
  • Xarelto (Janssen): Lowered the cost for a 30-day supply by 62%, or from $517 to $197.
  • Eliquis (Bristol Myers Squibb): The cost for a 30-day supply decreased from $521 to $231, or by 56%.
  • Entresto (Novartis): Reduced the list price for a 30-day supply by 53%, or from $628 to $295.
  • Imbruvica (Pharmacyclics): Decreased the cost for a 30-day supply from $14,934 to $9,319, or by 28%.

CMS sent the initial offers for the 10 drugs to the manufacturers on Feb. 1, and the companies had until March 2 to respond with a counteroffer. Then throughout the summer, the agency held meetings with the drugmakers to continue negotiations, before sending final offers on July 15.

The negotiation period ended on Aug. 1 with a deal in place for all 10 drugs, CMS said.

The new prices will go into effect on Jan. 1, 2026. CMS estimates that Medicare beneficiaries will see aggregate savings of $1.5 billion in their personal out-of-pocket costs in 2026.

Final cost savings can vary based on the enrollee's specific plan, the agency said.

CMS said it will select up to 15 additional drugs for negotiation in 2027, and the list will be announced by Feb. 1, 2025.

Reaction rolls in

Multiple lawmakers praised CMS and the efforts to reduce drug prices in statements Thursday.

Sen. Ron Wyden, D-Ore., who chairs the Finance Committee, said that Medicare used "the bargaining power of tens of millions of American seniors to fight Big Pharma for lower drug prices."

"These new, lower prices for prescription drugs in Medicare means seniors save money at the pharmacy counter and marks the first step in a seismic shift in the relationship between Big Pharma, taxpayers, and seniors who need affordable prescription drugs," Wyden said.

Rep. Frank Pallone, D-N.J., who is the ranking Democrat on the House Energy & Commerce Committee, said that the negotiations will lead to $101 million in savings for seniors living in the Garden State.

Pallone also helped to co-write the Inflation Reduction Act, which gave Medicare the power to negotiate with drug companies.

"This is a historic day for New Jersey and the nation. After more than two decades of fighting, we have finally empowered Medicare to negotiate lower prescription drug prices for our seniors," said Pallone. "This milestone is especially meaningful for New Jersey, where many seniors rely on Medicare for their life-saving medications."

Reactions, however, were not universally positive. Pharmaceutical Research and Manufacturers of America (PhRMA) CEO Steve Ubl said in a statement Wednesday that regulators won't be able to achieve their ultimate goal as the negotiation program does not take aim at pharmacy benefit managers.

Ubl also said that the IRA "fundamentally alters" the incentives drugmakers have in researching and developing new products and therapies. He said companies are already making changes to their R&D programs in response.

“The administration is using the IRA’s price-setting scheme to drive political headlines, but patients will be disappointed when they find out what it means for them," Ubl said. "There are no assurances patients will see lower out-of-pocket costs because the law did nothing to rein in abuses by insurance companies and PBMs who ultimately decide what medicines are covered and what patients pay at the pharmacy."

“As a result of the IRA, there are fewer Part D plans to choose from and premiums are going up," he continued." Meanwhile, insurers and PBMs are covering fewer medicines and say they intend to impose further coverage restrictions as the price-setting scheme is implemented."

The Pharmaceutical Care Management Association, which represents PBMs, meanwhile, said that its analyses show that PBM negotiations have driven more significant discounts on six of the 10 drugs included in the program.

“While we share the Administration’s goal to reduce prescription drug costs for America’s seniors and to push back against the high prices set by drug manufacturers, the Administration has missed the mark by choosing several prescription drugs for which PBMs are already actively negotiating steep discounts that significantly lower costs for beneficiaries and taxpayers," PCMA said.

“The key to reducing drug costs is to increase competition among manufacturers," the organization said. "We encourage the Administration to focus on those drugs where a lack of competition is driving higher prices and higher costs, and to allow PBM negotiations to continue to deliver value and savings for Medicare.”

While the negotiation program takes more direct aim at drugmakers, PBMs are also under the microscope on the Hill. Lawmakers are mulling a slew of potential reforms to the industry, which critics argue is too concentrated, too opaque and too profit-driven at the expense of patients.