Medicare Drug Price Negotiations Show Promise, But Savings Still Lag Behind Other Nations
The first round of Medicare drug price negotiations resulted in lower prices for ten essential medications, but American patients are still paying more than those in other developed countries, a new study reveals.
Researchers examined the negotiated prices of ten drugs – including treatments for diabetes, rheumatoid arthritis, and Crohn’s disease – announced by Medicare earlier this year. Their analysis, published in JAMA, compared these negotiated prices to the drugs’ pre-negotiation costs and to list prices in six other high-income nations: Australia, Canada, France, Germany, Switzerland, and the UK.
The study found negotiated prices were 8% to 42% lower than initial net prices. For example, the monthly cost of dapagliflozin (Farxiga), a common diabetes treatment, fell from $193.80 to $178.50, while the price of sitagliptin (Januvia) dropped from $195.60 to $113.00.
Interestingly, the size of the price reductions varied significantly. This could be because negotiators considered both price history and clinical advantage when setting final prices.
"The negotiations included two pairs of drugs that belonged to the same drug class – Eliquis/Xarelto and Farxiga/Jardiance. In each case, the drug with added therapeutic value ended up with a higher negotiated price. This suggests that negotiations have better aligned drug prices with therapeutic value," Olivier J. Wouters, PhD, lead author of the study from the London School of Economics and Political Science, stated.
However, even with these price reductions, most drugs remained more expensive in the U.S. compared to other countries.
"As an example," Wouters explained, "the negotiated price for ustekinumab for a 30-day supply was $4,695.00, which was still higher than its cost in France ($1,219.92) and Germany ($2,503.99)."
The researchers suggest that the Inflation Reduction Act, which authorized these negotiations, could be strengthened. For instance, they propose shortening the period biologics are exempt from negotiation and allowing Medicare to negotiate the costs of Part B drugs in future rounds.
"Congress could consider allowing Medicare to negotiate the prices of biologics earlier to create more savings for American taxpayers," Wouters recommended.
The study acknowledges that data limitations prevented a full comparison with prices in other countries. Still, the findings highlight the potential for Medicare negotiations to lower drug costs, while emphasizing the need for ongoing evaluation and strategic adjustments to maximize savings and ensure fairness for all.
