On November 4, 2021, the Biden administration took a significant step towards implementing its promise of allowing Medicare to negotiate drug prices. The Centers for Medicare & Medicaid Services (CMS) announced that they had initiated the process to negotiate prices for the first set of 10 drugs under the Medicare Part B program. This move marks a major shift in the government's approach to addressing the rising costs of prescription drugs in the United States.

Under the current system, Medicare is prohibited from directly negotiating drug prices with pharmaceutical companies. This lack of negotiation power has resulted in higher drug costs for Medicare beneficiaries and the program as a whole. The Biden administration aims to change this by leveraging the collective purchasing power of Medicare to secure lower prices for prescription drugs.

The 10 drugs selected for negotiation represent a diverse range of therapeutic areas and include both widely used and high-cost medications. The specific drugs have not been disclosed, but they are expected to include treatments for conditions such as cancer, rheumatoid arthritis, and autoimmune disorders. By targeting high-cost drugs, the administration aims to address some of the most significant cost drivers in Medicare Part B.

The negotiation process will involve the CMS establishing a maximum price it is willing to pay for each drug. Pharmaceutical manufacturers will then be required to submit bids based on this maximum price. If the negotiations are successful, Medicare will be able to purchase the drugs at a lower cost, resulting in savings for both the program and its beneficiaries.

While the exact savings from these negotiations are yet to be determined, several studies have estimated the potential impact of Medicare drug price negotiations. For example, a study published in JAMA Internal Medicine in 2019 estimated that allowing Medicare to negotiate drug prices could lead to savings of $2.8 billion annually for just the 50 most expensive drugs covered by Medicare Part D. Another analysis by the Congressional Budget Office projected that giving Medicare the authority to negotiate drug prices could result in savings of $456 billion over a decade.

The Biden administration's move to break ground on Medicare price negotiations for the first 10 drugs is a significant step towards fulfilling its campaign promise of lowering drug prices and making healthcare more affordable for Americans. It sets the stage for further negotiations and potential expansions of Medicare's price negotiation authority in the future.

References:

1. Centers for Medicare & Medicaid Services (CMS) Press Release: https://www.cms.gov/newsroom/press-releases/cms-announces-groundbreaking-first-step-medicare-drug-price-negotiation

2. JAMA Internal Medicine Study: https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2758458

3. Congressional Budget Office Report: https://www.cbo.gov/system/files/2021-09/57023-Drug-Pricing.pdf