Negotiated drug prices for Medicare are here

The Biden administration on Thursday announced the first results of Medicare’s new power to negotiate drug prices. Democrats and allied groups touted billions of dollars in savings — older Americans will save approximately $1.5 billion in out-of-pocket costs, and the government will save $6 billion, the White House said.

“It’s a relief for the millions of seniors that take these drugs to treat everything from heart failure, blood clots, diabetes, arthritis, Crohn’s disease, and more – and it’s a relief for American taxpayers,” President Biden said in a statement.

“We showed that major progress can be made for the American people when we work together to take on special interests, even as Big Pharma continues to go to court to try to block lower prices for consumers.”

But for all the political victory laps from Democrats, the numbers touted by the administration don’t mean much.

The negotiated rates represent a savings from 38 percent to 79 percent over the 2023 list prices of the drugs, which were some of the priciest in Medicare.

But Medicare doesn’t pay the full list price, so it’s difficult to tell just how much seniors are actually saving on a drug-by-drug basis.

The number that matters is how much people save relative to the net price, which is the price of the drug after prescription drug plans negotiate with manufacturers and pharmacy benefit managers. But that amount is a secret, and Medicare can’t disclose it.

So for individual patients, the amount they save will largely depend on their insurance plan and their drug costs.

The negotiated prices won’t take effect until 2026, but senior White House officials said they don’t expect the savings that year to be “materially different” from the estimates released Thursday.