Author: Morgan Perry
Congress passed the Inflation Reduction Act (IRA) on August 16, 2022, allowing the Federal Government to negotiate prices for a group of high-cost drugs used in the Medicare program.
The IRA requires the Centers for Medicaid and Medicare Services (CMS) to identify the top 100 most expensive drugs in Medicare and select 10 for price negotiations in 2023.
The Biden administration announced a plan and timeline for negotiating drug prices with pharmaceutical manufacturers. However, price increases will not begin until 2026.
Here’s everything more about price negotiations:
The Timeline for the Drug Price Negotiation for 2023.
The CMS will issue guidance on engaging the public, including healthcare providers, pharmacies, consumer advocates, and drug manufacturers.
According to CMS Administrator Chiquita Brooks-LaSure, Medicare will collect feedback to ensure that individuals with Medicare pay reasonable rates for some of the most expensive drugs.
After collecting these data, the CMS will publish a list of ten retail drugs for price negotiation in September 2023.
The next step will be for the drug companies chosen for negotiation to sign an agreement to participate in the negotiation process in 2026. This step’s deadline is October 2023.
In 2024, CMS will begin bargaining with drug manufacturers and publish price changes for selected drugs by September 2024. Prices will then go into effect on January 1, 2026.
In addition, after the first ten approved drugs, the federal health program will target another 30 physician-administered and retail medicines over the next two years (2027-2028). Then in 2029, Medicare will negotiate drug prices for up to 20 drugs.
How Will the Drug Price Negotiations Affect Americans?
Experts say that if you are uninsured or have coverage through your employer, drug price negotiations will be of little to no help. Because of rising materials costs, inflation, and supply chain costs, big pharma companies will seek to maintain high prices.
Furthermore, according to Antonio Ciaccia, CEO of 46Brooklyn Research, CMS’s drug price negotiations may cause working-age Americans and private employers to pay more for drugs. On the other hand, Medicare and its beneficiaries may benefit from lower-cost medications.
Ciaccia went on to say that while one segment of the population gets the best deal, everyone else gets the worst deal. To get the best drug prices starting in January 2026, you must be a Medicare beneficiary.
How Will the Price Discounts Impact Pharma Companies?
According to a Department of Health and Human Services report, pharmaceutical companies raised their prices by an average of 32% on over a thousand prescription drugs from July 2021 to July 2022.
As a result, drug price negotiations may force pharmaceutical companies to reform their cost structures and reorganize their operations to boost profitability.
Manufacturers will also reconsider their financial support for disease-focused foundations that assist patients with out-of-pocket costs.
Furthermore, with the IRA in place, pharmaceutical companies may have to adjust their prices, so it will be interesting to see how product launch prices evolve. However, expensive treatment will become more affordable because of the $2,000 cap for non-life-threatening diseases.
The Bottom Line
The Biden administration released a timeline and plan for negotiating drug prices on Wednesday. Beginning this summer, CMS will release information on how to engage the public in selecting ten expensive drugs whose costs will be negotiated with manufacturers. The first price negotiating program will last two years, after which the prices will be updated in January 2026.