Medicare's Bold Move: Drug Price Cuts Promise Billions in Savings

The U.S. Medicare health plan's negotiation for lower drug prices aims to save $8.5 billion by 2027. Prices for 15 expensive medications will be reduced by 36%, including popular drugs like semaglutide. This move follows President Biden's Inflation Reduction Act, allowing Medicare to negotiate prices directly with drugmakers.

The U.S. Medicare health plan revealed a substantial victory in its quest for affordable healthcare on Tuesday, announcing that newly negotiated prices for 15 of its most expensive drugs would save an estimated 36% on medication expenses compared to recent spending levels. This translates to approximately $8.5 billion in reduced net prescription costs.

Among the notable negotiations is the price cut for Novo Nordisk's drug semaglutide, marketed as Wegovy and Ozempic, effective 2027 with a new monthly cost of $274, down from the previous $428, showing Medicare's leverage. The Inflation Reduction Act of 2022, signed by President Joe Biden, grants Medicare the ability to negotiate directly with pharmaceutical companies, a legislative breakthrough aiming for broader accessibility and affordability in medication.

Key industry players have expressed reservations about government-imposed pricing, claiming it discourages innovation. However, with significant savings anticipated from drugs like AstraZeneca's Calquence, Boehringer's Ofev, and Pfizer's Ibrance, Medicare's strategy represents a landmark effort to manage healthcare costs. This negotiation wave also sets a precedent for future price benchmarks, with additional discussions set to expand in February.

(With inputs from agencies.)