For the first time in its history, Medicare is negotiating drug prices directly with pharmaceutical companies. This initiative, established under the Inflation Reduction Act, aims to lower the cost of prescription medications for millions of Americans under the Medicare umbrella. The negotiations are on-going, but the new prices are scheduled to be announced on Sept. 1, 2024, with those prices going into effect on Jan. 1, 2026.

Here’s what you need to know about the medications currently in negotiations.

How can Medicare negotiate drug prices with companies?

While there’s a lot of technical language that goes into the selection process, the decision for the initial ten drugs essentially came down to a few factors. 

1. Find Expensive Drugs Without Cheaper Options: Medicare looks for drugs that:
   • Are brand-name only (no generic or similar versions available)
   • Have been on the market for a while:
     • 7+ years for regular drugs
     • 11+ years for biologics (drugs made from living cells)
2. Exclude Certain Drugs: Some drugs are excluded from negotiation, like:
   • Orphan drugs (used to treat rare diseases)
   • Drugs that Medicare doesn’t spend much money on
   • Drugs made from plasma (the liquid part of blood)
3. Narrow Down the List: They look at the remaining drugs and pick the 50 that cost Medicare the most money. However, they exclude small biotech drugs.
4. Rank by Cost: Finally, they rank those 50 drugs by how much they cost Medicare. This helps them prioritize which drugs to negotiate first.

Think of it like this: Medicare is looking for the “big spenders” among the drugs – the ones that are expensive, have no cheaper alternatives, and that Medicare is paying a lot of money for. They’ll start by negotiating prices for the most expensive ones on that list.

What drugs is Medicare negotiating?

These ten initial drugs treat a variety of common and expensive conditions. In general, these drugs treat cardiovascular disease, diabetes, autoimmune diseases, and cancer.

• Eliquis: Blood thinner for preventing strokes and blood clots
• Jardiance: Treatment for type 2 diabetes and heart failure
• Xarelto: Blood thinner for preventing strokes and blood clots
• Januvia: Treatment for type 2 diabetes
• Farxiga: Treatment for type 2 diabetes and heart failure
• Entresto: Treatment for heart failure
• Enbrel: Treatment for autoimmune diseases like rheumatoid arthritis and psoriasis
• Imbruvica: Treatment for blood cancers
• Stelara: Treatment for autoimmune diseases like psoriasis and Crohn’s disease
• Fiasp/NovoLog: Insulin products for diabetes

How many Medicare Part D enrollees use these drugs?

According to a fact sheet from CMS, “about 8,247,000 people with Medicare Part D coverage” used these drugs between June 1, 2022 and May 31, 2023. That was the period used to determine which drugs were eligible for negotiating.

In addition, CMS said these drugs accounted for $50.5 billion in total Part D gross covered prescription drug costs — about 20-percent of total gross covered prescription drug costs.

While the initial list of ten drugs is just the beginning, the Medicare Drug Price Negotiation Program represents a significant shift in how prescription costs are managed. The potential for lower out-of-pocket expenses for these medications, and others in the future, could bring much-needed relief to millions of Medicare beneficiaries.