The US makes first offers in negotiations over the price of Medicare drugs
Why it matters: The price offers are the start of the negotiations.
The drugs selected for the negotiations are used by millions of Americans to treat conditions such as diabetes, cancer and heart disease. The government identified them in August and started a lengthy process aimed at resulting in an agreed price that would come into effect in 2026, assuming the negotiating program survives legal challenges.
The first round of price offers is an important step in the negotiation process. Each drug manufacturer has until early March to accept the offer or propose a counter-offer to the government. A series of negotiating sessions could follow, the process of which could conclude in August.
Health policy experts said the announcement of the first round of offers amounted to a kind of starting gun, giving the Biden administration a chance to take an aggressive stance and test drugmakers' willingness to agree.
The proposals help “set the tone for the rest of this back and forth,” said Andrew W. Mulcahy, a health economist at the RAND Corporation who has advised the Biden administration on implementing drug price negotiations.
The government did not publicly reveal how much it was offering for each drug.
What happens next: The courts have yet to decide.
The price negotiation program was created by the Inflation Reduction Act, the climate, tax and health care package that President Biden signed into law in 2022. Additional drugs will be chosen for price negotiations in the coming years. The program is expected to save the federal government nearly $100 billion over the next decade.
The price negotiation program is a key part of the White House's efforts to lower everyday costs for Americans, and it is a policy Mr. Biden can point to as he campaigns for re-election.
“Medicare will no longer accept the prices for these drugs that pharmaceutical companies demand,” Biden said in a statement Thursday.
But the pharmaceutical industry is hoping the courts will intervene to halt the program, which drugmakers say is unconstitutional. The industry has long argued that allowing the government to negotiate prices will limit private innovation and discourage companies from developing new drugs.
Lawsuits brought by drugmakers, the industry's main trade group and the U.S. Chamber of Commerce are still pending in courts across the country. A federal judge in Delaware heard arguments Wednesday in a case brought by AstraZeneca, the maker of a diabetes drug selected for price negotiations.