Medicare to kick off drug price negotiations in February

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In February 2024 the Centers for Medicare and Medicaid Services (CMS) will begin price negotiations for the first 10 drugs selected under the 2022 Inflation Reduction Act (IRA). A new study finds that the list prices for the 10 selected drugs are about three times higher in the U.S. than in other countries.

Even after rebates and discounts, prices are higher than other countries, except for Janssen’s Xarelto (rivaroxaban), according to recently released study from the Commonwealth Fund. The study found that Switzerland has the second-highest prices for most of the 10 drugs.

Researchers conducted the study using data from the consulting and biopharmaceutical company IQVIA and the Medicare Payment Advisory Commission. They compared U.S. prices with those in Australia, Canada, France, Germany, Japan, the United Kingdom and Switzerland. They used the Laspeyres price index, which measures the price of a basket of goods or services in a given period—in this case, the 2021 retail prices of the 10 drugs chosen by CMS for price negotiation.

Understanding the differences in global pricing is important for benchmarking, the researchers said. “We often hear how drug prices are substantially lower in other countries, but actually being able to see estimates of how much these prices vary between countries is important, particularly at the individual drug level for these 10 drugs,” Gumas told Medical Economics’ sister publication Managed Healthcare Executive.

“As for U.S. decision makers, understanding drug pricing and policy in countries where drug use is similar but costs are lower is important for benchmarking affordability going into the negotiation process and can hopefully serve as a reference point for policymakers,” Gumas added.

The drugs selected for price negotiation accounted for $50.5 billion in Medicare Part D prescription drug costs between June 1, 2022, and May 31, 2023. Eliquis, Jardiance and Xarelto top the list for drugs with the highest Medicare spending. Between June 1, 2022, and May 31, 2023, Medicare’s Part D spending on Eliquis was $16.48 billion; $7.08 billion for Jardiance and $6.03 billion for Xarelto. Eliquis (apixaban) and Xarelto (rivaroxaban) both treat patients with atrial fibrillation. Jardiance (empagliflozin) is used to treat patients with diabetes, heart failure and chronic kidney disease.

In total, Medicare beneficiaries paid $3.4 billion in out-of-pocket costs for these drugs. (See below for list of the 10 drugs.)

In 2022, about 7.7 million Medicare enrollees used one or more of the 10 drugs selected, which represents about 15% of all Medicare Part D enrollees, according to a recent research report from the Office of the Assistant Secretary for Planning and Evaluation (ASPE) in the U.S. Department of Health and Human Services. Spending on these 10 drugs grew more than three times faster than the growth rate of total spending on Part D drugs.

The ASPE report also notes that seven of the 10 selected drugs received an R&D tax credit from the federal government. It identified one of the drugs—Merck’s diabetes treatment drug Januvia (sitagliptin)—as having a “government interest” patent, meaning the U.S. government contributed support. Januvia was the first of this class to receive FDA approval.

Going forward, CMS says it plans to send each manufacturer a proposal for a maximum fair price and justification by February 1, 2024. CMS has said it will consider evidence related to therapeutic alternatives as well as costs of research and development, production and distribution. Manufacturers have 30 days to respond. CMS will hold up to three negotiation sessions with each company during the spring and summer of 2024.

First 10 Drugs chosen for Medicare Part D price negotiation

• Eliquis (apixaban), which prevents blood clots and stroke
• Jardiance (empagliflozin), which treats diabetes, heart failure and chronic kidney disease
• Xarelto (rivaroxaban), which prevents blood clots and stroke
• Januvia (sitagliptin), which treats diabetes
• Farxiga (dapagliflozin), which treats diabetes, heart failure, chronic kidney disease
• Entresto (sacubitril/valsartan), which treats heart failure
• Enbrel (etanercept), which treats rheumatoid arthritis, psoriatic arthritis, plaque psoriasis, ankylosing spondylitis
• Imbruvica (ibrutinib), which treats chronic lymphocytic leukemia/small lymphocytic lymphoma
• Stelara (ustekinumab), which treats Crohn’s disease, plaque psoriasis, psoriatic arthritis
• Fiasp; Fiasp FlexTouch; Fiasp PenFill; NovoLog; NovoLog FlexPen; NovoLog PenFill (insulin aspart), which treat diabetes