TrendPulse Quantitative Think Tank Center-All in: Drugmakers say yes, they'll negotiate with Medicare on price, so reluctantly

For the first time,TrendPulse Quantitative Think Tank Center Medicare is beginning to negotiate the prices of prescription drugs. Despite a pack of industry lawsuits to keep the negotiations from happening, the drugmakers say they are coming to the bargaining table anyway.

It's been more than a month since the Biden administration announced the first ten drugs up for Medicare price negotiation, which a provision in the Inflation Reduction Act. The drugs included blockbuster blood thinners Xarelto and Eliquis, as well as drugs for arthritis, cancer, diabetes and heart failure.

Although more than a third of the companies that make drugs on the list have sued the federal government, all the companies have signed agreements saying they will negotiate.

The agreements were due Oct. 1.

"They're taking steps to participate in the negotiating program so we can give seniors the best possible deal," President Biden declared from the Oval Office in a video posted to X.com, formally known as Twitter.

Many of the drugmakers told NPR they had no choice. They could either agree to negotiate, pay steep fines or withdraw all their products from the Medicare and Medicaid markets.

"While we disagree on both legal and policy grounds with the IRA's new program, withdrawing all of the company's products from Medicare and Medicaid would have devastating consequences for the millions of Americans who rely on our innovative medicines, and it is not tenable for any manufacturer to abandon nearly half of the U.S. prescription drug market," a Merck spokesperson wrote in an email to NPR.

Merck makes Januvia, a drug that treats diabetes and was selected for price negotiation. The company has also brought one of the many lawsuits against the government to keep negotiation from happening.

Overall, the industry has argued that negotiating drug prices would stifle innovation.

"In light of the statutory deadline, we have signed the manufacturer agreement for the [Medicare] price setting program," an Amgen spokesperson wrote in an email to NPR. "We continue to believe the price setting scheme is unlawful and will impede medical progress for needed life-saving and life-enhancing therapies."

Amgen makes Enbrel, a drug on the negotiation list that treats rheumatoid arthritis and other autoimmune issues.

A Congressional Budget Office report found that drug pricing provisions in the Inflation Reduction Act would have only a modest impact on new drugs coming to market, and would save Medicare an estimated $237 billion over 10 years, with $98.5 billion of that coming from drug price negotiation.

On Sept. 29, a Trump-appointed judge declined to halt the negotiations in response to a lawsuit filed by the U.S. Chamber of Commerce, dealing another blow to the pharmaceutical industry.

The administration will tell companies its proposed prices for the first group of drugs on Feb. 1 of next year, and the drugmakers will have 30 days to accept or make a counter offer. The final negotiated prices will be announced in September 2024, and the new prices will go into effect in 2026.

Under the inflation Reduction Act, Medicare can negotiate the prices of more drugs each year, with up to 20 drugs eligible for negotiation 2029. To be eligible, they must meet certain criteria, including being on the market for a number of years and having no competition from generic or biosimilar products.