Big Pharma push back on first Medicare drug price cuts
In a significant move that marks a historic first, the Biden-Harris Administration announced on Monday, August 14th, that new, lower prices have been negotiated for the first ten drugs under Medicare. This decision is set to bring down out-of-pocket costs for millions of American seniors and others on Medicare, saving an estimated $1.5 billion in the first year alone.
For years, Americans have paid more for prescription drugs than citizens of any other developed country. However, the newly negotiated prices, which are part of the Inflation Reduction Act signed into law by President Joe Biden, represent a major step toward making healthcare more affordable for everyone. This act, which Vice President Kamala Harris played a critical role in passing by casting the tie-breaking vote, empowers Medicare to negotiate drug prices for the first time in history.
The impact of these changes is expected to be vast. According to the Department of Health and Human Services (HHS), the new prices will cut the list price of these ten drugs by between 38% and 79%. These drugs are widely used to treat serious conditions such as heart disease, cancer, diabetes, and arthritis. For example, seniors taking the drug Eliquis to prevent blood clots will see the price drop from $521 to $231 for a 30-day supply by 2026, a significant reduction of 56%.
The savings are not just for Medicare but extend to the broader economy as well. If these negotiated prices had been in effect in 2023, Medicare would have saved an estimated $6 billion. When these new prices take effect in 2026, people enrolled in Medicare Part D are projected to save $1.5 billion in out-of-pocket costs. These savings are a direct result of the administration’s efforts to tackle Big Pharma and reduce the financial burden on American families.
The announcement covers ten drugs with the highest total spending in Medicare Part D. Among them, Stelara, a drug used to treat arthritis, will see its price drop from $13,836 to $4,695, a 66% decrease. These reductions will provide much-needed financial relief to the 23,000 Medicare enrollees who used Stelara in 2023.
In addition to these price reductions, the Inflation Reduction Act includes provisions to cap out-of-pocket spending at $2,000 starting in 2025. This cap is expected to save 19 million beneficiaries an average of $400 per year. The impact is especially significant for those with the highest drug costs, who will save an average of $2,500 annually. This cap, combined with the newly negotiated drug prices, will make prescription drugs more affordable for millions of Americans.
The Biden-Harris Administration has also announced that more drugs will be added to the negotiation list each year. In 2025, up to 15 additional drugs covered under Medicare Part D will be selected for negotiation, with more to follow in subsequent years. This ongoing effort to lower drug prices is a clear indication of the administration’s commitment to reducing healthcare costs for Americans.
The savings from these negotiated prices are already being felt in other areas. For instance, Medicare enrollees are now saving an average of $70 in out-of-pocket costs on vaccines, thanks to the Inflation Reduction Act making recommended vaccines free for beneficiaries. Additionally, insulin costs have been capped at $35 per month for all Medicare Part D enrollees, saving some seniors hundreds of dollars a month.
The President’s Budget for Fiscal Year 2025 aims to build on these successes by accelerating the pace of drug price negotiations and expanding the $2,000 out-of-pocket cost cap beyond Medicare to the commercial market. The budget also includes proposals to curb inflation in prescription drug prices and extend the $35 cost-sharing cap for monthly insulin prescriptions to the commercial market, making these savings available to all Americans.
As these measures continue to roll out, millions of seniors and people with disabilities on Medicare will benefit from lower prescription drug costs. The Biden-Harris Administration’s actions represent a significant victory for American families, ensuring that life-saving medications are affordable and accessible to all. The road ahead may involve more battles with Big Pharma, but the progress made so far is a clear sign that change is possible, and it is happening now.
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