A major change is coming for pharma companies and seniors alike: The price of 10 blockbuster drugs will soon drop, and many more will follow.
The 2022 Inflation Reduction Act allowed Medicare to negotiate drug prices directly with big pharma for the first time, starting with 10 drugs in 2026 and expanding with 15-20 additional drugs each year.
The first crop of Part D drugs are used by 9 million seniors who can pay over $10,000 for some of the prescriptions. The discounts range from 38% to 79% off the list price.
At the top of the list is the blood thinner Eliquis, from Pfizer and Bristol Myers Squibb. Analysts are already nervous the upcoming changes could impact the companies’ bottom line, though the full impact won’t be known until price caps are announced in the coming months.
The government expects savings of about $25 billion a year by 2031, starting with $6 billion in savings in 2026, so it will be a sea change for big pharma.
Other affected companies include Merck, Johnson & Johnson, AbbVie, Amgen, Boehringer Ingelheim, Eli Lilly, Novo Nordisk and Novartis. As years go on and more Part D and Part B drugs are added to the program, virtually every drugmaker and nearly all 65 million Medicare members (which also includes younger people on disabilities) will be affected.
Already, 1 in 7 seniors don’t fill prescriptions because of high costs. The retail prices charged for the first 10 drugs affected are 3-8x more expensive in the U.S. than in comparable countries.
On the other side are drug companies that do not believe the program is even legal.
Big pharma has already sued to block the program and continues to fight tooth and nail to do so. A lower-court judge rejected the suit but it was just appealed and it’s possible it ends up in the U.S. Supreme Court.
It’s worth noting some of the affected drugs are likely to face competition soon as their patents expire - which could have an even bigger impact on pricing than the Medicare negotiations.
Drugs that bring in a whopping $236 billion in annual revenue are set to lose their exclusivity by the end of this decade. See the first link in the comments for more info on that.