The US government has finalised prices for the first ten drugs negotiated under the Inflation Reduction Act (IRA), marking a huge milestone since the Act was first announced in 2022.
The lower prices are the result of months of negotiations between the federal government and drugmakers over ten medications, which include Bristol Myers Squibb’s blood thinner Eliquis, Johnson & Johnson’s blockbuster inflammatory disease drug Stelara (ustekinumab), and Boehringer Ingelheim’s diabetes med Jardiance (empagliflozin).
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According to CMS, the negotiated prices for the ten drugs range from 38% –79% lower than the list price set by drugmakers. The new prices are expected to save taxpayers $6bn in 2026 and provide $1.5bn in savings for patients, said the Biden Administration in a 15 August announcement.
The government also shared some details about how the prices were negotiated. For five drugs, they reached an agreed price through negotiations. In four of these cases, CMS accepted the companies’ revised counteroffers. For five other drugs, CMS made a final written offer, which the companies accepted by the deadline.
The full list of the drugs and their prices can be seen below.
The IRA was introduced in 2022 and aims to curb inflation by allowing Medicare to negotiate prices and rebates for certain drugs. Industry critics have said the IRA has far-reaching implications for biotech and pharma companies, including reduced drug pricing for Medicare patients, diminished returns for investors, and altered business strategies.
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By GlobalDataThe rollout for these price negotiations has not been completely smooth. Following the announcement of the ten chosen drugs, the Biden Administration faced several lawsuits launched by pharma companies. The legal cases all made similar claims that the IRA violates the US Constitution. So far, lawsuits from Bristol Myers Squibb, Boehringer Ingelheim, Johnson & Johnson, AstraZeneca, and Novo Nordisk, have all been rejected in federal courts. Those companies have all since appealed these decisions, as per a tracker run by Georgetown University’s O Neill Institute.
Following today’s (15 August) announcement, the pharma lobbying group Pharmaceutical Research and Manufacturers of America (PhRMA) issued a stark statement: “The IRA also fundamentally alters the incentives for medicine development. Companies are already changing their research programs as a result of the law, and experts predict this will result in fewer treatments for cancer, mental health, rare diseases and other conditions.
Medicine development is a long and complex process, and the negative implications of these changes will not be fully realised for decades to come.”
Despite this backlash, Medicare is already in the midst of planning for the next wave of negotiations. The agency will select up to 15 additional drugs covered under Part D for negotiation in 2025, and up to an additional 15 Part B and Part D drugs in 2026, and up to 20 drugs every year after that.
Jeff Jonas, portfolio manager at the investor group Gabelli Funds said: “It will start to get more painful over time. There will be 15 more drugs chosen for 2027, likely including Novo Nordisk’s Ozempic for diabetes/obesity. There was also some speculation that the government went easy on the pharma companies this year given that it is both an election year and the first time they’re doing this. 2028 could include some big cancer drugs like Merck’s Keytruda. So manageable for now, but will be a headwind and something to watch in the future.”
