U.S. issues initial Medicare drug price negotiation guidance

The U.S. government will select the Medicare program's 10 costliest prescription medicines based on gross spending for negotiating price cuts that will go into effect in 2026, the U.S. Centers for Medicare and Medicaid Services (CMS) said on Wednesday CMS will only accept one formal written counter offer during the negotiation process, but will allow up to three additional in-person or virtual negotiation meetings, the agency said in initial guidance issued on Wednesday for its Medicare drug price negotiation program.

The program was established under the Inflation Reduction Act, which President Joe Biden signed into law last year. It will for the first time allow Medicare, the government health insurance program for millions of Americans age 65 and older, to negotiate prices on prescription drugs, beginning with the ones on which it spends the most. "Through the Medicare Drug Price Negotiation Program, we will make sure seniors get a fair price on Medicare’s costliest prescription drugs, promote competition in the market, and ensure Medicare is strong for beneficiaries today and into the future," Secretary of Health and Human Services (HHS) Xavier Becerra said in a statement.

CMS will announce the first 10 drugs on Sept. 1. The negotiation period will start in February and last until August. In September of 2024, CMS expects to publish the negotiated "maximum fair price" that would become effective in 2026. For the purposes of selecting drugs for negotiation, CMS said it would include spending on all formulations or dosage forms of a drug, even if it received a separate U.S. Food and Drug Administration approval for a different use.

The agency said it was soliciting public comment on parts of the guidance and would consider any it receives by April 14, but the selection process for which drugs will be subject to negotiation is final. CMS said it will use the price of therapeutic alternatives to a drug, if any exist, as a starting point in developing its initial price offer, taking into account the medicine's clinical benefit, including how it compares to competitors.

Big-selling drugs made by Bristol Myers Squibb, Pfizer, and AbbVie are likely to be among the medicines subject to the first round of price negotiations, according to analyses by academics and Wall Street analysts shared with Reuters. CMS also announced a list of 27 drugs earlier on Wednesday that would be subject to penalties because their manufacturers hiked prices last quarter higher than the rate of inflation, a move it said would reduce out-of-pocket costs for Medicare recipients by as much as $390 per dose.

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