New drug price negotiations will decrease prices

The Inflation Reduction Act of 2022 enabled Medicare to negotiate prices for prescription drugs for the first time in the program’s history. In August 2023, Medicare announced the first 10 Medicare Part D drugs selected for negotiation. The U.S. Centers for Medicare and Medicaid Services submitted its initial offer for negotiated prices in February 2024, and the negotiated prices will be finalized and published in September 2024. The negotiated prices will take effect in January 2026. These 10 drugs are among those with the highest annual Medicare Part D spending, indicating very high prices and/or very high utilization rates. Given limited transparency in drug pricing, it is often difficult to estimate drug costs, especially because net prices, which are often unknown, differ from list prices and vary among payers.

This new Center for American Progress analysis builds on net per-unit Medicare Part D drug price estimates from the Commonwealth Fund, inclusive of discounts, rebates, and price concessions, to estimate net Medicare prices for a typical 30-day supply of the first 10 drugs up for price negotiation. From there, the center calculated the likely monthly savings that will result from Medicare’s price negotiation.

CAP estimates that 30-day net price reductions for negotiation-eligible drugs could range from a low of $30 for insulin product NovoLog FlexPen to a high of $6,548 for cancer drug Imbruvica. (see Table 1)

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Roughly 9 million Medicare Part D beneficiaries take these 10 drugs. Subsequently, even small per-person reductions in monthly prices can amount to millions of dollars in annual Medicare savings. For example, price negotiation of Eliquis could result in a price reduction of $123 for a 30-day supply. Given that more than 3.5 million Part D beneficiaries use Eliquis, this would add up to significant monthly and annual Medicare savings.

Conclusion

Medicare drug price negotiation will meaningfully lower the prices Medicare pays for prescription drugs. Medicare and its Part D beneficiaries could save thousands on a 30-day supply of some of the negotiated drugs. Each year, Medicare will negotiate the prices of additional prescription drugs, totaling a cumulative 80 drugs by 2030. The benefits of drug price negotiation will only compound over the years, totaling $25 billion through 2031 and reducing beneficiary costs through lower premiums and cost sharing.