CMS' negotiated drug prices: 12 notes

For the first time, the largest buyer of pharmaceuticals in the U.S. — Medicare, which covered more than 67 million people as of April — has bargaining power in an industry worth $640 billion. 

12 things to know:

1. CMS gained negotiation authority after President Joe Biden signed the Inflation Reduction Act in August 2022. It allows the agency to negotiate the price of drugs without generic or biosimilar competition that heavily cost Medicare Parts B and D. 

2. The agency released the negotiated prices Aug. 15. Medications on the list treat heart conditions, blood clots, leukemia, lymphoma, Type 2 diabetes, kidney disease, rheumatoid arthritis, psoriasis, Crohn's disease and ulcerative colitis.

3. The first 10 negotiated prices, listed below, will be effective Jan. 1, 2026. CMS also has negotiation powers for 15 Part D drugs for 2027, 15 more Part B or D drugs for 2028 and 20 more Part B or D drugs for each year afterward.

4. The negotiated prices are for a 30-day supply.

5. Janssen is the only pharmaceutical company with more than one medication on the list and four of the 10 medicines are approved for Type 2 diabetes.

Financial implications

6. CMS expects the negotiated prices to reduce healthcare costs by $7.5 billion in 2026.

7. The selected drugs contributed more than $50 billion in gross Medicare costs between June 1, 2022, and May 31, 2023, according to CMS. If the negotiated drug prices were in effect in 2023, it would have saved the federal government about $6 billion in drug costs.

8. Medicare prescription drug coverage enrollees will save an estimated $1.5 billion when the negotiated prices take effect in 2026.

9. The drug negotiation program would have saved the government $26.5 billion 2018 to 2020, according to a recent study published in JAMA Health Forum. 

10. On July earnings calls, CEOs from Bristol Myers Squibb, AbbVie, Janssen and Novartis all expressed confidence that their company's long-term outlooks would not be negatively affected by the negotiated prices, according to CNBC. 

Litigation and criticism

11. Lawsuits filed by Novo Nordisk, AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb and Johnson & Johnson have attempted to stop the negotiations but were rejected by federal judges, according to CNN. Similar lawsuits brought by Merck and Novartis are awaiting decisions from the courts, CNBC reported.

12. After the list was published, Novartis and Bristol Myers Squibb both said the negotiated prices do not reflect the value of their medications. Giovanni Caforio, MD, former CEO of BMS, has previously denounced the Inflation Reduction Act, saying that the discounted medications will hurt revenue and hinder drug research and discovery. 

The discounts