Last week, the White House announced a milestone in health care policy. After decades of effort, and for the first time, the government successfully negotiated drug prices directly with pharmaceutical companies. For years, the fight to control health care prices, perhaps the most significant factor in health care spending, has felt like an unwinnable battle, so it’s no small feat that Medicare is finally flexing its negotiating muscles. But it’s also a drop in the bucket.
In a country where an estimated 18 million people are unable to afford the medications they need, reducing drug costs is likely to resonate with many voters. And it’s not surprising that Kamala Harris’s campaign is highlighting this news. It’s a well-deserved victory lap over the fact that the Biden administration delivered on a long-promised reform, and one that advances Ms. Harris’s commitment to health equity. Many countries’ health care systems negotiate for better prices. Medicare, traditionally, has not. When George W. Bush’s administration passed Medicare Part D (drug coverage), it included language specifically preventing the government from negotiating directly with drug companies. Because of that, most insurance companies contract with pharmacy benefit managers, middlemen who negotiate with the drug companies for specific deals. This complexity can lead to more spending and more frustration.
The Inflation Reduction Act changed that. It established a new drug price negotiation program, allowing the government to negotiate for all Medicare recipients. The first 10 drugs were selected about a year ago, and the agreements’ results, released Thursday, have a projected savings of $6 billion.
Six billion dollars isn’t chump change, and that number will surely grow as more drugs are added to the list for consideration. Ozempic, the blockbuster diabetes drug, could be up for negotiation next year, for instance.
But it’s also a tiny component of the roughly $250 billion part D spends on drugs. It’s an even tinier part of the $4.5 trillion that the United States spent on health care in 2022 alone.
In fact, it’s likely that a fair number of seniors won’t actually feel much of a change in their yearly out-of-pocket costs from these new prices. Many who buy these drugs, even after the reduction, would still hit the cap on out-of-pocket spending that Medicare part D allows. Right now, most seniors who max out their out-of-pocket contributions can expect to pay between $3,300 and $3,800 on prescription drugs. But next year, a new $2,000 out-of-pocket cap will go into effect for everyone enrolled in Medicare, as a result of another provision in the Inflation Reduction Act.
Prices for negotiated prescription drugs
More common, cheaper medications
COST FOR A ONE-MONTH SUPPLY
200
400
$600
$628 in 2023
Entresto
Heart failure
$295 in 2026
$573
Jardiance
Diabetes
$197
$556
Farxiga
Diabetes
$197
$527
Januvia
Diabetes
$113
$521
Eliquis
Blood clots
$231
$517
Xarelto
Blood clots
$197
$495
Fiasp
Diabetes
$119
Less common, more expensive medications
COST FOR A ONE-MONTH SUPPLY
5,000
10,000
$15,000
$14,934 in 2023
Imbruvica
Blood cancers
$9,319 in 2026
$13,836
Stelara
Psoriasis
$4,695
Enbrel
$7,106
Rheumatoid
arthritis
$2,355
More common, cheaper medications
COST FOR A ONE-MONTH SUPPLY
200
400
$600
$628 in 2023
Entresto
Heart failure
$295 in 2026
$573
Jardiance
Diabetes
$197
$556
Farxiga
Diabetes
$197
$527
Januvia
Diabetes
$113
$521
Eliquis
Blood clots
$231
$517
Xarelto
Blood clots
$197
$495
Fiasp
Diabetes
$119
For less common, more expensive medications
COST FOR A ONE-MONTH SUPPLY
5,000
10,000
$15,000
$14,934 in 2023
Imbruvica
Blood cancers
$9,319 in 2026
$13,836
Stelara
Psoriasis
$4,695
Enbrel
$7,106
Rheumatoid
arthritis
$2,355
Source: Centers for Medicare & Medicaid Services
Note: The medical condition listed for each drug is just one of the commonly treated conditions.
Graphic by Sara Chodosh
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