Medicare’s drug price negotiation will likely save billions of dollars, according to the study

A provision in the Inflation Reduction Act that allows Medicare to negotiate the prices of the most expensive prescription drugs each year is likely to save billions of U.S. dollars, provided the pharmaceutical industry doesn’t interfere, according to a study published Friday in the JAMA Health Forum .

Beginning in 2026, Medicare will begin negotiating the price of 10 drugs that cost the federal government the most, followed by 15 more drugs in 2027, 15 more drugs in 2028, and 20 more drugs in each subsequent year.

Researchers at Brigham and Women’s Hospital and Harvard Medical School estimated how much money the new policy would have saved in the United States if it had been in effect from 2018 to 2020, the most recent years for which data on Medicare spending is available.

They identified 40 drugs that would be selected by Medicare for drug price negotiation under the Inflation Reduction Act provision.

Under the policy, the negotiation process applies to drugs that have been on the market for a certain amount of time — nine years for drugs and 13 years for biologics — and only if the drug doesn’t have a comparable alternative, such as a generic .

Most of the drugs on the 2018 to 2020 list were reimbursed under Part D — the Medicare subsidy that covers drugs prescribed at home — although a handful fell under Part B — the Medicare subsidy that covers drugs administered at home. a hospital or infusion center.

The researchers simulated negotiated prices using a so-called price ceiling, which is at least 25% lower than the average price that drug makers charge non-governmental entities, such as private health insurance providers. According to the Inflation Reduction Act, the maximum price traded must fall below this maximum price.

The researchers found that the Medicare drug negotiation provision would have saved US$26.5 billion, or 5 percent of all drug spending, during those three years.

“That’s a pretty sizable reduction in spending on a very small number of drugs,” said lead author of the study, Dr. Benjamin Rome, a primary care physician at Brigham and Women’s Hospital and an instructor at Harvard Medical School.

Robin Feldman, an expert on pharmaceutical law and intellectual property at the University of California College of the Law, San Francisco (formerly the University of California, Hastings), said the study “shows what is possible,” assuming the industry does not undermine the impact of the law before it takes effect.

“Drug companies are likely to fight vigorously against the interpretation of each provision so that the hammer doesn’t fall on their drugs,” said Feldman, who was not involved in the study.

The Centers for Medicare & Medicaid Services said earlier this month that it’s still working on its plan for exactly how to implement negotiations with drugmakers. It plans to release a list of the top 10 drugs that will be subject to drug price negotiations by September.

Meanwhile, Tricia Neuman, a Medicare expert with KFF, formerly known as the Kaiser Family Foundation, said many in the drug industry are likely looking for ways to circumvent provisions that impact their ability to keep their profits high.

“I don’t think anyone would be surprised to find that the industry opposes it,” said Neuman, who was not involved in the study.

Rome, the study’s lead author, said one way drug companies could sidestep the law is to allow a select few manufacturers to produce generic versions of their drugs before they are traded.

They could also avoid negotiating through the “evergreen,” he said, which occurs when a drugmaker makes incremental changes to its product and then reintroduces it to market as a reformulated version.

However, he said, Medicare’s ability to negotiate drug prices should deliver long-term savings in the United States.

It should provide “very, very high discounts,” he said.

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