Overview: The Biden-Harris Administration has announced agreements with drug companies for new, lower prices for 10 drugs covered under Medicare, which will save Medicare an estimated $6 billion and Americans who pay out of pocket will save another $1.5 billion. The negotiated prices will go into effect for people with Medicare Part D prescription drug coverage on January 1, 2026. The drugs chosen for negotiations accounted for $56.2 billion in total Medicare spending, or an estimated 20% of total Part D gross spending in 2023. CMS will choose up to 15 more drugs covered under Part D for negotiation for 2027 by February 1, 2025.
Breanna Reeves
After signing the Inflation Reduction Act in 2022, aimed in part at lowering prescription drug prices, the Biden-Harris Administration announced on August 15, that it reached agreements with drug companies for new, lower prices for ten prescription drugs covered under Medicare.
The Centers for Medicare & Medicaid Services (CMS) selected ten drugs covered under Medicare Part D to negotiate pricing for the first time. Medicare Part D is a program that helps cover the cost of prescription drugs and can be added to an original Medicare plan or by joining a Medicare Advantage Plan with drug coverage.
Among the highest cost drugs that were negotiated down to a 79% discount was Januvia, medication used to treat type 2 diabetes, which had a $527.00 price tag for one month during 2023. The negotiated price is now $113.00. Among the other drugs negotiated were medications for kidney disease and heart failure.
The new prices will go into effect for people with Medicare Part D prescription drug coverage on January 1, 2026.
“For the first time ever, Medicare negotiated directly with drug companies and the American people are better off for it,” said U.S. Department of Health and Human Services (HHS) Secretary Xavier Becerra in a press release. “Today we’re announcing that in our first year of negotiations we are saving Medicare an estimated $6 billion and Americans who pay out of pocket will be saving another $1.5 billion moving forward.”
According to HHS, the drugs chosen for negotiations accounted for $56.2 billion in total Medicare spending, or an estimated 20% of total Part D gross spending in 2023. Medicare enrollees paid a total of $3.4 billion in out-of-pocket costs in 2022 for these drugs.
As of 2023, more than 51 million Americans are enrolled in Medicare Part D, including those who are enrolled in stand-alone prescription drug plans and Medicare Advantage plans that offer prescription drug coverage.
“CMS is proud to have negotiated drug prices for people with Medicare for the first time. These negotiations will not only lower the prices of critically important medications for cancer, diabetes, heart failure, and more, but will also save billions of dollars,” said CMS Administrator Chiquita Brooks-LaSure.
These ten drugs, chosen for negotiations, are among those with highest total spending in Medicare Part D. Under the Inflation Reduction Act of 2022, there were several provisions included to lower prescription drug costs for people with Medicare and reduce drug spending by the federal government. The law also placed a $35 insulin cap on Medicare part D enrollees.
CMS reported that if these negotiated prices had been in effect in 2023, an estimated $6 billion in net covered prescription drug costs would have been saved.
CMS will choose up to 15 more drugs covered under Part D for negotiation for 2027 by February 1, 2025. The federal agency will also select up to 15 more drugs covered by Part B or Part D for 2028, and up to 20 more Part B or Part D drugs for each year after that, as required by the Inflation Reduction Act.
As a federal fee-for-service health insurance program, Medicare is divided into several parts. Part A helps cover the costs of inpatient care in hospitals, skilled nursing facility care, hospice care and home health care. Part B is medical insurance and helps cover provider services and wellness visits. Part C is Medicare Advantage, a Medicare-approved plan from a private company that offers an alternative to Original Medicare (Part A and Part B). Those who qualify for Medicare Advantage plans are those who are 65 years of age and older, individuals under 65 who have an eligible disability, and people with permanent kidney failure and ALS.