Major pharmaceutical companies oppose first price cuts for Medicare drugs

Their comments came after US President Joe Biden and Vice President Kamala Harris announced an agreement to reduce costs for the first 10 drugs selected for Medicare pricing negotiations.

The agreement with the pharmaceutical companies – who said they entered into negotiations because they had no other choice – is expected to save seniors in the United States $1.5 billion in out-of-pocket costs.

It is the result of months of negotiations and is expected to save Medicare six billion dollars in the first year alone, Biden said, referring to the government health insurance for seniors.

While the announcement is likely to be a boon for Democratic presidential candidate Harris as she works on her economic policy message ahead of the November election, pharmaceutical companies have long opposed these cuts.

The US government may initially select only ten drugs for price negotiations and can expand the program in subsequent years.

Major pharmaceutical companies are fighting back against first price cuts for Medicare drugs, Photo: youtube/ CBS News

– 'Not objective' –

The agreements follow the Inflation Reduction Act (IRA), a comprehensive package of measures on energy transition and social reforms.

This allowed Medicare to begin negotiating drug costs for the first time in its nearly 60-year existence.

Novartis, whose heart failure drug Entresto is one of the ten selected drugs, objected to the pricing process, saying it was “neither objective nor transparent.”

“Novartis believes that the price-fixing provisions in the IRA are unconstitutional and will have long-term and devastating consequences,” the company added in a statement.

The company said it only agreed to a “maximum fair price” to “avoid other untenable options, including catastrophic fines or removal of all of our products from Medicare and Medicaid.”

For the 10 selected drugs, the price reductions will be between 38 and 79 percent from 2023. The new costs will come into effect in 2026.

In addition to Entresto, the drugs include AstraZeneca's Farxiga, which is used to treat diabetes, and the anticoagulant Eliquis, which is used by millions of Medicare recipients.

AstraZeneca said in a separate statement that the company accepted the price because “walking away was not an option.”

If a manufacturer refuses to accept the price, it could affect access for Medicare and Medicaid patients, they said.

– Costs for the patient? –

The companies also warned that patients could still incur higher costs and argued that the deal would undervalue their products.

Bristol Myers Squibb (BMS), which is behind Eliquis, pointed out that “insurance plans and their pharmacy benefit managers are ultimately responsible for what patients pay.”

“The IRA does not protect patients from potential increases in their cost-sharing or restrictions on access to Eliquis,” the company added, once the maximum fair price takes effect in 2026.

However, CFRA analyst Sel Hardy noted that BMS management seemed confident it could handle the IRA's impact on Eliquis.

A spokesman for Johnson & Johnson described the law as arbitrary and lacking a scientific basis.

This “underestimates the benefits our medicines bring to millions of patients,” J&J said.

– “Historic milestone” –

The United States has the highest prescription drug prices in the world, forcing many people to pay part of their already exorbitant insurance premiums out of their own pockets.

The new agreement came after Democrats pushed for the government to be able to negotiate prices directly with drug manufacturers for government health programs.

The White House called the agreement on lower prices a “historic milestone.”

“The Vice President and I are not backing down,” Biden said in a statement on Thursday.

His comments came ahead of a first joint public event with Harris since she replaced him as the Democratic candidate in the upcoming election.

“We will continue our fight to ensure that all Americans pay less for prescription drugs and to give American families more flexibility,” he said.

The rising cost of living is a central issue in the 2024 elections.

Last October, pharmaceutical manufacturers of selected drugs for serious illnesses reluctantly agreed to negotiate price reductions.

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