2028 Selected Drugs: Medicare Drug Price Negotiations
TL/DR –
The Centers for Medicare and Medicaid Services (CMS) has announced 15 drugs for the third round of negotiations under the Medicare Drug Price Negotiation Program, including Trulicity, Botox, and Xeljanz. The drugs selected must be single-source drugs with no generic or biosimilar competition and cannot include certain orphan drugs or plasma products; they are chosen based on high Medicare expenditures due to cost and beneficiary need. The negotiation process leads to a negotiated price, or Maximum Fair Price, which is paid for the drug across all Part D plans or Original Medicare Part B and Medicare Advantage plans for Part B drugs, potentially saving billions of dollars in net covered prescription drug costs.
An Overview of the Medicare Drug Price Negotiation Program
The Centers for Medicare and Medicaid Services (CMS) recently revealed a list of 15 drugs to be included in the third cycle of negotiations under the Medicare Drug Price Negotiation Program. This selection follows the Inflation Reduction Act (IRA) established provisions that mandate the identification of 10 to 15 drugs for each cycle of negotiations within the program.
The third cycle’s list includes drugs like Trulicity, Biktarvy, Orencia, Cosentyx, Erleada, and 10 others. It also features the drug, Tradjenta, which is under renegotiation.
Understanding How Drug Price Negotiations Work
The selection process for the third negotiation cycle under the IRA and subsequent amendments mandates that only single source drugs without generic or biosimilar competitors are eligible. The list of drugs also excludes certain orphan drugs, plasma products, and those falling under a small biotech exception. The 15 drugs that generate the highest total Medicare expenditures, based on cost and beneficiary numbers, are chosen for the negotiation.
Consequently, these negotiations culminate in an agreed price, termed the Maximum Fair Price (MFP) under the statute. This price is what all Part D plans or Original Medicare Part B and Medicare Advantage plans pay for the drug.
The Financial Impact of Drug Price Negotiations
Drug price negotiations have proven to be financially beneficial. CMS projections suggest that if the prices achieved in the second negotiation cycle had been operational in 2024, they would have resulted in nearly 12 billion dollars of savings in net covered prescription drug costs.
Impacts on Medicare Beneficiaries
It is crucial to realize that while these negotiations reduce drug costs across the Medicare program, it does not guarantee cost-sharing reductions for individual beneficiaries. Several factors determinate whether a beneficiary’s cost sharing for a negotiated drug decreases or not. These factors include the price the individual’s plan initially negotiated for the medication, the tier the drug was placed on in the plan’s formulary, and the cost-sharing structure utilized by the plan.
Notably, even small reductions in the total price of widely-used medications can lead to significant savings for the program and potentially decrease or slow the growth of premiums. However, these reductions may not necessarily translate into lower copayment amounts for beneficiaries in some plans.
Enhanced Medication Affordability through IRA Amendments
Aside from the negotiation program, the IRA has introduced other changes to improve the affordability of Medicare, including caps on insulin costs, improved access to low-income assistance, and a cap on out-of-pocket costs for beneficiary Part D spending.
The efforts to lower drug costs and improve healthcare affordability for older adults and people with disabilities will continue. There is an ongoing call for policymakers to build on the success of the IRA and further reduce healthcare costs across the system.
For more information on the Medicare Drug Price Negotiation Program, click here.
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