AARP reports that the names of the first 10 Medicare drugs whose prices the federal government will negotiate directly with manufacturers were released in late August. “It marks the first time in history that the price of life-sustaining medications that millions of older Americans in the nation’s largest health program rely upon to prevent strokes and blood clots and to treat diabetes and cancer will be subject to direct negotiation,” said AARP, an AgeWise Colorado Provider. “This is an important first step toward finally allowing Medicare to use its purchasing power to lower drug prices.”

Medicare reportedly spends more than $135 billion on prescription drugs every year. In just a single year

Medicare Part D spent $50 billion on these first 10 drugs selected for negotiation. That represents 20 percent of Part D spending during that time period. These medications were used by 8.2 million Medicare beneficiaries. AARP says negotiated prices will save the government money, and lower Medicare spending is also expected to lead to lower Part D premiums.

The first 10 drugs subject to negotiations between Medicare and drugmakers include the following, with notes as to what type of drug it is, what Medicare spent in a recent year, and how many Medicare patients were prescribed the drug. This is according to the Centers for Medicare and Medicaid Services (CMS).

Eliquis—a blood thinner. Medicare spending of $16.5 billion for 3.7 million patients.

Jardiance—for diabetes and heart failure. $7 billion for 1.6 million patients.

Xarelto—a blood thinner. $6 billion for 1.3 million patients.

Januvia—for diabetes. $4 billion for 869,000 patients.

Farxiga—for diabetes, heart failure, and chronic kidney disease. $3.3 billion for 799,000 patients.

Entresto—for heart failure. $2.9 billion for 587,000 patients.

Enbrel—for rheumatoid arthritis and psoriasis. $2.8 billion for 48,000 patients.

Imbruvica—a blood cancer drug. $2.7 billion for 20,000 patients.

Stelara—for psoriasis, arthritis, Crohn’s disease, and ulcerative colitis. $2.6 billion for 22,000 patients.

Novolog—for diabetes. $2.6 billion for 777,000 patients.

Some Specifics about the Drugs – Negotiated Drug Prices

According to AARP, in order to be eligible for negotiation, medicines that are called small molecule drugs — which are typically taken in pill form and obtained at a pharmacy — must have been on the market for seven years and not have a generic alternative. Biologics, which are drugs made from living organisms rather than chemicals, must have been available for 11 years with no nearly identical alternatives available.

Federal officials drew the list of 10 from among the 50 medications that Medicare Part D spends the most on and that are used most by beneficiaries. All but three of the first 10 drugs are small molecule medicines.Drugmakers that decline to negotiate prices face substantial financial penalties or must stop participating in Medicare and Medicaid, the latter being the health coverage program for people with low incomes.

A bit of history

When Congress first added a prescription drug benefit to Medicare nearly two decades ago, the law forbade the program to negotiate drug prices with pharmaceutical companies. AARP has been one of the most vocal advocates for changing that policy. “Medicare negotiates a lot of different services that it covers, and prescription drugs were not a part of that until now,” said Leigh Purvis, AARP’s prescription drug policy principal. “Medicare has tens of millions of beneficiaries and brings a lot of bargaining power to the table and will be able to get better prices for people who are taking these drugs.” Nearly 52 million Medicare beneficiaries are either enrolled in a Part D prescription drug plan or get drug coverage through their Medicare Advantage plan.

Coloradans may be seeing some cost breaks already in negotiated drug prices

For the first 10 selected drugs, their manufacturers and CMS are scheduled to begin negotiating prices in early October, with the negotiated cost figures to take effect in 2026. But under the same law that triggered negotiations, there are other provisions that are already beginning to save beneficiaries money.

For example, the $35 cap for Medicare beneficiaries on monthly copays for insulin took effect in 2023, as did free vaccines including the shingles shot (Shingrix®). Another provision that started in 2023 requires drugmakers to pay rebates to Medicare for drugs whose prices increased above the inflation rate.

In 2024, beneficiaries with high drug expenses will get a break from paying any out-of-pocket costs once they reach the so-called catastrophic phase of the Part D prescription drug benefit. Part D premiums will not be allowed to increase more than 6 percent. And in 2025, enrollees who either have a stand-alone Part D drug plan or whose prescriptions are covered by their Medicare Advantage plan will see their annual out-of-pocket costs capped at $2,000. “Collectively, these policies will help lower costs for people on Medicare until the negotiations provision takes effect in 2026,” said Tricia Neuman, senior vice president and head of the Medicare program at KFF (formerly the Kaiser Family Foundation.)

A potential Colorado “wrinkle” in the drug costs picture

As the Medicare negotiation of drug costs moves forward, Colorado has its own program underway designed to lower drug costs. According to KFF Health News, the state’s Prescription Drug Affordability Board that is charged with addressing drug affordability in Colorado has chosen its first five drugs for review. Two of those drugs — Enbrel for rheumatoid arthritis and Stelara for psoriasis — are also among Medicare’s first 10 drugs to be negotiated. KFF says “Any federally negotiated price reductions won’t take effect until 2026, and it’s unclear how that effort will affect the Colorado board’s work in the interim.” The board has been working more than a year to sort through roughly 600 drugs eligible for review in order to create a prioritized list. Similar to Medicare’s approach, it has focused on drugs with no brand-name competition or generic alternatives. Any cost limits the Colorado board selects wouldn’t take effect until 2024 at the earliest.

There is also some concern voiced about a downside risk with cost limits on drugs in Colorado. That concern is whether drug manufacturers would limit access to certain drugs or no longer sell them at all in the state. KFF reported on one Coloradan who currently takes a drug for cystic fibrosis (Trikafta), which has an “annual in-state price of approximately $200,000” and which the state’s Affordability Board has chosen among its first five drugs to review. The patient, who reports having her life enormously improved with the drug, worries that limiting its costs might provoke the manufacturer, Vertex Pharmaceuticals, to stop selling it in Colorado. KFF calls this potential outcome of selecting drugs for review “one of the thorniest questions the board must wrangle with,” and adds that “what happens in Colorado could have implications nationwide.”   

More on the expected financial impacts of negotiated drug prices in Colorado

Back to the national context, AARP points out that the impact of this new drug negotiation policy will go beyond the savings to Medicare beneficiaries who take the 10 drugs on the initial negotiations list. Medicare is scheduled to choose 15 additional drugs for negotiations with prices to take effect in 2027, another 15 in 2028 and 20 more medications annually starting in 2029.

“People are feeling the effects of high prescription drug prices through higher premiums and cost sharing, even if you aren’t taking the drugs yourself,” AARP said. Lower prices for consumers also mean that the Medicare program will save money. The nonpartisan Congressional Budget Office has estimated that the negotiations provision of the new law will save Medicare $98.5 billion over 10 years.

Big drug companies fought against this provision and continue to oppose it. Manufacturers as well as several business groups have filed lawsuits in federal courts across the country in an attempt to derail the negotiation process. AARP and AARP Foundation recently filed a friend of the court legal brief urging a federal judge to deny a request by several chambers of commerce that the negotiations process be delayed.

The basic timetable for negotiated drug prices going forward

AARP listed the following as steps that are scheduled as the drug negotiation process continues:

  • Aug. 29, 2023: CMS makes public the list of the 10 Medicare Part D drugs whose prices will be negotiated for 2026.
  • Oct. 1, 2023: Deadline for manufacturers of those 10 drugs to agree to participate in the negotiation process or face penalties.
  • Oct. 2, 2023: Deadline for the drugmakers of the 10 medications to provide CMS with the data it needs to determine a “maximum fair price.”
  • Feb. 1, 2024: The negotiation period begins as CMS provides the drugmakers with its initial maximum fair price offer.
  • March 2, 2024: Drugmakers have 30 days to accept the CMS price offer or propose another price.
  • Aug. 1, 2024: Negotiation period ends.
  • Sept. 1, 2024: CMS will publish the list of maximum fair prices.
  • Jan. 1, 2026: Maximum fair prices take effect for the first 10 drugs.
  • 2027: Negotiated prices for 15 additional drugs take effect.
  • 2028: Negotiated prices for another 15 drugs take effect.
  • 2029 and beyond: Negotiated prices for 20 additional drugs per year take effect.