HHS Opens Drug Price Dickering

With newfound authority granted by the IRA, HHS bids on 10 drugs selected for the first round of negotiations.

The federal government on Thursday offered its opening bid for mandated discounts on 10 pricey but widely used drugs in the Medicare program, beginning what are expected to be contentious and months-long negotiations with the nation's largest drug makers.

"Today is another milestone on the march to ensure people with Medicare get fair prices for prescription drugs. I am confident that this process will lead to lower prices, putting an end to exorbitant price gouging by pharmaceutical companies," Health and Human Services Secretary Xavier Becerra said in a media release.

With newfound authority granted by the Inflation Reduction Act, HHS named the 10 drugs selected for the first round of negotiations in August and announced in October that the makers of the 10 selected drugs agreed to negotiate a "maximum fair price."

The negotiations are expected to be drawn out over several months and finalized by August 1, with the new prices taking effect in 2026.

Drug makers are incensed by the mandate, and several companies at the table also have filed lawsuits challenging the mandate that gives Medicare the power to leverage its unmatched buying power.

Pharmaceutical Research and Manufacturers of America (PhRMA) spokesman Alex Schriver called the negotiations "an exercise to win political points on the campaign trail rather than do what's in the best interest of patients."

"Government bureaucrats are operating behind closed doors to set medicine prices without disclosing for months how they arrived at the price or how much patient and provider input was used," Schriver said. "This lack of transparency and unchecked authority will have lasting consequences for patients long after this administration is gone."

Reports: U.S. Consumers Pay A Lot More

HHS fired back with fresh reports detailing the high prices that U.S. consumers pay for common drugs, such as insulin, when compared with other industrialized countries.

A new RAND report released this week to coincide with the launch of the negotiations found that prescription drug prices in the U.S. are about 2.78 times those seen in 33 other nations. That gap is even larger for brand-named drugs, RAND reports, with U.S. prices averaging 4.22 times those in comparison nations. Prices for generics -- which account for 90% of prescription volume in the U.S. -- are about 67% of the average cost in the comparison nations, the report notes, while prices for insulin are five to 10 times higher than those in other countries.

"These findings provide further evidence that manufacturers' gross prices for prescription drugs are higher in the U.S. than in comparison countries," said Andrew Mulcahy, lead author of the study and a senior health economist at RAND. "We find that the gap is widening for name-brand drugs, while U.S. prices for generic drugs are now proportionally lower than our earlier analysis found."

In addition, a report from Accountable.US found drug makers with products targeted for negotiation—including Merck, Eli Lilly, and Johnson & Johnson's Janssen—reported combined earnings of $38.7 billion in 2022, with combined stock buybacks and dividends increasing by $1.9 billion and $1.5 billion, respectively.