'Stakes Are Huge': Medicare Makes Opening Bids in Price Negotiations With Big Pharma

The Biden administration announced Thursday that it made its opening bids as part of Medicare's historic drug price negotiation program, which major pharmaceutical companies are working hard to kill in court.

The initial offers, which were not made public, were sent to the manufacturers of the 10 drugs that the Biden administration selected for the initial round of price negotiations. Additional medicines will be subject to price negotiations in later years.

The companies—including Merck, Johnson & Johnson, Pfizer, and Amgen—have 30 days to either accept Medicare's proposed maximum fair price for the selected medicines or put forth a counteroffer. Over the coming spring and summer, Biden administration officials will hold negotiation meetings with drug company representatives to resolve price disputes if the government doesn't accept the drugmakers' counters.

In September, the Centers for Medicare and Medicaid Services (CMS) will publish the negotiated prices, which won't take effect until 2026.

Margarida Jorge, the head of Lower Drug Prices Now, said in a statement Thursday that "for the first time, Medicare isn't just accepting whatever prices the drug corporations set for expensive and widely used drugs in Part D like Xarelto and Eliquis—instead, the agency, newly empowered under the new Medicare negotiations law, will propose lower prices for 10 of the most expensive drugs in Medicare Part D to kick off the negotiations process."

Jorge noted that around 9 million seniors on Medicare "spent an estimated $3.4 billion out-of-pocket on these ten drugs in 2022 to treat blood clots, cancer, diabetes, arthritis and other common conditions."

"Big Pharma made record profits by using their monopoly power to set prices and keep them high, forcing many Medicare patients to forgo other necessities, incur debt, or go without medicine because the prescriptions were not affordable," Jorge added. "Now, despite a barrage of lawsuits, paid ads, and threatening prognostications from the drug corporations, Medicare is on track to implement the new reforms that will lower prices, make costs affordable, and save taxpayers billions over the next decade."

"We are moving ahead to help people in spite of pharma's efforts to block negotiation in the courts."

The list prices of the drugs chosen for the initial round of negotiations range from around $7,000 a year in the case of Johnson & Johnson's Xarelto to over $133,000 annually for AbbVie and Johnson & Johnson's Imbruvica.

Lawrence Gostin, faculty director of the O'Neill Institute for National and Global Health Law at Georgetown University, said he expects the price negotiations to be "tense and hostile" given that the "stakes are huge for industry and the administration."

"It'll end up at SCOTUS and become a central issue in the 2024 presidential election," Gostin predicted.

A majority of the initial 10 drugs are made by companies that are currently suing the Biden administration in an effort to strike down the price negotiation program, which represents a serious challenge to the industry's ability to drive up prices at will.

According to government data, the selected drugs accounted for roughly 20% of total Medicare Part D spending between June 1, 2022 and May 31 of last year.

An analysis released earlier this month by the Commonwealth Fund found that list prices for the 10 drugs are three times higher on average in the U.S. than in other rich countries.

David Mitchell, founder of Patients for Affordable Drugs, said Thursday that the Biden administration's opening offers mark a "big step forward to lower drug prices."

"We are moving ahead to help people in spite of pharma's efforts to block negotiation in the courts," Mitchell added. "A good day for America."