The Biden administration is preparing to reveal Tuesday the first 10 drugs that will be subject to negotiation in Medicare, according to two sources briefed on the matter.
The controversial program was authorized by the Inflation Reduction Act that Democrats pushed through Congress last year. The drug industry and their supporters, however, are determined to quash the effort, filing at least eight lawsuits in recent weeks declaring it unconstitutional.
Undaunted, the Centers for Medicare and Medicaid Services has pushed ahead with its historic new power, which Democrats have long argued is a way to lower drug prices. The White House is planning public events to coincide with the announcement, which comes a few days ahead of the agency's September 1 deadline to make the list public.
Multiple industry experts and the drugmakers themselves have predicted which medications are likely to be in the first round of negotiations. They include Eliquis, manufactured by Bristol Myers Squibb, which said in a lawsuit filed in June that it expects its blood thinner to be on the initial list, and Januvia, a diabetes drug made by Merck, which was the first to take legal action in early June. Other names floated include the blood thinner Xarelto, the cancer treatment Imbruvica and Ozempic, a blockbuster medication used for diabetes and weight loss.
The initial set of drugs will be chosen from the top 50 Part D drugs that are eligible for negotiation that have the highest total expenditures in Medicare. CMS will consider multiple factors when developing its initial offer, including the drugs' clinical benefits, the price of alternatives, research and development costs and patent protection, among others.
What happens next
Drugmakers have a month to decide whether to participate. CMS and the manufacturers will then negotiate, and the agency will publish the agreed-upon maximum fair prices by September 1, 2024. The prices won't take effect until 2026.
If drugmakers don't comply with the process, they will have to pay an excise tax of up to 95% of the medications' US sales or pull all their products from the Medicare and Medicaid markets. The pharmaceutical industry contends that the true penalty can be as high as 1,900% of sales.
After the initial round, the Health and Human Services secretary can negotiate another 15 drugs for 2027 and again for 2028. The number rises to 20 drugs a year for 2029 and beyond. Only medications that have been on the market for several years without competition are eligible.
In the first two years of negotiations, CMS will select only Part D drugs that are purchased at pharmacies. It will add Part B drugs, which are administered by doctors, to the mix for 2028.
The program is expected to save Medicare $98.5 billion over 10 years, according to the Congressional Budget Office.
Drugmakers' court challenges
Manufacturers hope to halt the negotiation process, filing multiple lawsuits in federal courts across the US. They each argue the program is unconstitutional in various ways and also say that the negotiation provision will harm innovation and patients' access to new drugs.
Among the arguments are that the program violates the Fifth Amendment's "takings" clause because it allows Medicare to obtain manufacturers' patented drugs, which are private property, without paying fair market value under the threat of serious penalties.
Plus, the negotiations process violates the First Amendment, the challengers say, because it coerces manufacturers into saying that they agree to the price that the government has dictated and that it's fair.
Another argument is that the process violates the Eighth Amendment by levying an excessive fine if drugmakers refuse to negotiate and continue selling their products to the Medicare market.
The Biden administration, however, has said that nothing in the Constitution bars it from negotiating drug prices. Legal experts have generally agreed.
"The Biden-Harris Administration isn't letting anything get in our way of delivering lower drug costs for Americans," Secretary of Health and Human Services Xavier Becerra said in a statement in June. "Pharmaceutical companies have made record profits for decades. Now they're lining up to block this Administration's work to negotiate for better drug prices for our families. We won't be deterred."