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By Suzanne Blake
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Seniors will soon find out the new prices for several drugs under Medicare, and their wallets may be better off for it.
Under the Inflation Reduction Act, Medicare gained the ability to negotiate drug prices after years of the practice being banned. Those prices will be made official in September. Medicare Part D covers prescription drugs, but there were no rules in place allowing price negotiation, often leaving seniors with hefty bills and limited ways of covering necessary drugs.
The changes are part of the Act, which was approved in Congress in 2022 and signed into law by President Joe Biden. It resulted in negotiations between Medicare and big pharma for 10 drugs. In 2025, that will be 15 prescription drugs, with as many as 20 being negotiated by 2030.
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"For seniors, this is a game-changer," Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek. "For certain prescription drugs covered by Medicare Part D over the years, negotiations for better pricing haven't been allowed. With the Inflation Reduction Act taking effect, though, now there are up to 10 drugs that Medicare will be able to enter negotiations over pricing with pharmaceutical companies."
Currently, Medicare Part D spends more than $200 billion per year, with much of the money going to the same types of medications. The drugs that will now be negotiated cost more than $50 billion between June 2022 and June 2023.
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Drug companies have been negotiating with Medicare since February, with the end of negotiations set for September 1. Once the prices are set, they will go into effect in January 2026.
Not All Drugs Impacted
According to the law, the medications selected had to fit certain criteria: They must be brand-name drugs without a generic version and need to have been available for at least seven years at the time of negotiation.
Some of the most popular drugs used by Medicare recipients are blood thinners Eliquis and Xarelto. Others include heart and diabetes medications Jardiance and Farxiga, along with cancer treatment drug Imbruvica.
The costs for these types of medications can quickly add up, with the average recipient paying somewhere between $121 to $5,247, according to the Department of Health and Human Services.
The price negotiations haven't gone without pushback from big pharma. Several lawsuits have been filed by drug companies, who allege the new negotiations are unconstitutional because of Medicare's power. There are also concerns that drug innovation will decline because companies will not end up bringing their medications to market under the new price rules.
"In the long run, this policy is really not good for innovation, good for patients in the United States," Novartis CEO Vasant Narasimhan said in an investor meeting this month.
Novartis produces heart failure medication Entresto, which is also popular among Medicare recipients and one of the chosen drugs for negotiation.
The Congressional Budget Office has given a different impression of the negotiated prices' impact, though. Of 1,300 drugs anticipated to enter the market in the next three decades, the office said only 13 would likely be impacted.
The negotiations will also save the government $98.5 billion over the next decade, the CBO previously said.
"Pricing for certain drugs has been a nightmare in recent years, and Medicare recipients know how these costs can play a pivotal role in what they receive," Beene said. "Negotiations with pricing will allow Medicare to not just get a better deal for its recipients, but also open up funding to be spent in other critical areas."
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