Biden administration strikes deal to cut prices on some of Medicare's costliest drugs

Medicare reached agreements with major pharmaceutical companies to cut the cost the government pays for ten prescription drugs used by millions of Americans. It marks the first time the government has been able to negotiate directly with drugmakers, a result of provisions in the Inflation Reduction Act. Amna Nawaz discussed the impact with Neera Tanden, domestic policy adviser to President Biden.

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Amna Nawaz: As we just heard, Medicare has reached agreements with major pharmaceutical companies to cut the cost the government pays for 10 prescription drugs used by millions of Americans.

This marks the first time the government has been able to negotiate directly with drugmakers, a result of provisions in the Inflation Reduction Act past two years ago.

Today, in Maryland, President Biden called it a success more than half-a-century in the making.

Joe Biden, President of the United States: First time I sponsored a bill to let Medicare and negotiate the price of drugs was in 1973 as a freshman senator.

I thank God that, in the last three months I’m president of the United States, I was able to finally get done when I tried to get done when I was a young senator 30 years ago.

(Cheering)

(Applause)

Amna Nawaz: The drugs selected were some of the costliest and most frequently dispensed in the program, including blood thinners, Eliquis and Xarelto, medication used to treat heart failure like Entresto and Farxiga, and the diabetes drugs Januvia and Fiasp.

To discuss the impact and the implications of the historic negotiations, we’re joined now by Neera Tanden, domestic policy adviser to President Biden.

Neera, welcome back to the program. Thanks for joining us.

Neera Tanden, White House Domestic Policy Adviser: Thank you so much for having me.

Amna Nawaz: So, as the president said, it’s a long time coming on these kinds of agreements. So when will Americans actually start to feel the impact? How soon should they expect to pay less for these medications?

Neera Tanden: The — per the statute, this will be implemented January 1, 2026.

So people will experience those prices, seniors will experience these prices through 2026. The law specifies that these are just the first 10 drugs. However, next year, they will negotiate 15, 15 the year after that, and then 20 from here on forward.

So this is really the beginning of lowering drug prices for seniors.

Amna Nawaz: So, Neera, some of the savings that have been hailed by the president and vice president today, we should point out they’re compared to the list prices of the drugs.

And we know those list prices can be higher than the privately negotiated prices that Medicare plans actually end up paying for a lot of these medications. So some experts say the percentages being held up by the administration here in terms of what’s being saved are a little misleading because of that.

What do you say to that?

Neera Tanden: In every instance, in all of these 10 drugs, the price negotiated by Medicare is lower than the price that people pay for the drugs in — that for the seniors pay for these drugs.

So this is going to be savings for seniors. In addition, we know that there will be $1.5 billion in savings for the millions of people in Medicare. So this is definitely delivering savings to seniors. And, again, it’s just the beginnings.

Amna Nawaz: In terms of what the average senior would actually save, though, it’s also true to say that there’s other factors like rebates and co-pays and drug middlemen, of course, that also factor into what individuals end up paying for each of the medications.

So is it possible to say what the average American would actually save as a result of this change?

Neera Tanden: Well, there are a lot of different insurance plans, so it’s a little hard to say exactly how much each person pays.

But we know that they will have significant savings. And we also know that other elements of the prescription — of the Inflation Reduction Act — other elements of the Inflation Reduction Act will deliver savings as well.

January 1, 2025, in just a few months, we will have the $2,000 cap on all drugs for seniors. So for people taking Enbrel or other drugs that are very expensive, they will also benefit from the $2,000 cap.

This is a significant savings, though, to individuals and more importantly and as importantly, I should say it’s a significant savings to the taxpayer. There will be $6 billion in savings to the Medicare program. This is a significant portion of the $160 billion in savings we will have from the drug reforms and the Inflation Reduction Act over the next 10 years.

Amna Nawaz: As I’m sure you have seen, the drug companies have long argued that lowering prices, among other things, stifles innovation. We have also seen some of the pharmaceutical companies and their umbrella organizations already challenging this in the courts.

Are you worried about the potential downsides of this, that it could stifle innovation or the litigation could have an impact here?

Neera Tanden: Well, first of all, the Congressional Budget Office did an assessment of the Inflation Reduction Act and found that one out of thousands of drugs would be limited over the next 10 years.

They really found this argument that there’d be a lack of innovation to not stand up. And so we think it’s important. We think that it’s important that we have innovation, of course. We know that companies are extremely profitable.

I would also say, when it comes to the litigation, even judges who’ve been nominated by Republican presidents have found that this is well within the power of Congress.

Amna Nawaz: Neera, as you may have heard, there’s an election looming.

(Laughter)

Amna Nawaz: And we have heard from Republicans alleging that this is a political ploy to woo senior voters, in particular. Even the head of the pharmaceuticals industry lobbying group, the president of the Pharmaceutical Research and Manufacturers group said this is to score political points.

He says patients will be disappointed when they don’t see the impact the administration is hyping. The timeline raises the question. Why now? Is this the political ploy?

Neera Tanden: This timeline was determined by the statute. The statute said that we have to negotiate the drug prices. They had to be public by September 1. We are meeting that statute deadline.

The statute required that they go into effect in January 2026. I think HHS has been ready to do it earlier, but that’s what it’s specifies. And the fact is, I just think this is — we really just dismiss this argument that this is about politics. It’s about politics if you believe politics should be about solving people’s problems

Then it is political. It is not political in any other way. And I think one of the reasons why we’re hearing from the opponents of this that it’s political or there’s some other nefarious thing going on is because Republicans had a chance to vote for this. They had a chance to vote for the Inflation Reduction Act.

They had a chance to vote for prescription drug reform. They had a chance to lower drugs for seniors. And they said no.

Amna Nawaz: That is domestic policy adviser to President Biden Neera Tanden joining us tonight.

Neera, thank you. Good to speak with you.

Neera Tanden: Thanks so much for having me.