Drugs hit hardest in Medicare price negotiations

Listen to the article
5 mins

This audio is automatically generated. feedback.

Pharmaceutical companies are preparing for the financial impact of price cuts determined by the CMS Medicare negotiation process in 2026. Overall, Final Price It announced significant price cuts to government insurance programs, with discounts ranging from 38% to 79%.

Once the pricing takes effect, Medicare Part D plan enrollees will save $1.5 billion, but the negotiated prices are unwelcome news for drugmakers, who say executives at some of the companies affected by the 2026 wave are worried. The impact was downplayed The company predicted in its second-quarter earnings call that the IRA would impact its bottom line, but its continued implementation will deal a major blow to some of Big Pharma’s best-selling drugs.

Drug price damage

Merck & Co. is facing the biggest list price cuts for its diabetes drug Januvia. But declining demand and generic competition caused revenue from the drug to fall in the first half of 2024, according to the company’s earnings report. In 2026, Medicare will pay $113 for a 30-day supply of Januvia, a 79% discount from its 2023 list price of $527, which is sure to accelerate revenue declines.

But Januvia is unlikely to have a significant impact on Merck’s overall financial picture: The company reported sales of more than $16 billion in the first half of this year, helped in part by a 16% increase in sales of its hit cancer drug Keytruda. By comparison, Januvia accounted for only about 5% of total sales.

AstraZeneca’s Farciga, a diabetes drug, also saw a significant price cut in the latest CMS data, with a price change of 68% in 2026. The drug is a top seller for AZ, Revenue: $3.8 billion That accounted for $25.6 billion of the company’s sales in the first half of the year, according to its most recent earnings report.

Beyond diabetes, blood thinner Eliquis is also facing steep price cuts, with a 56% drop. Bristol-Myers Squibb, which owns the drug with partner Pfizer, said the new price does not reflect the value of the drug, which will be used by about 4 million Medicare patients in 2023. Eliquis was the top-selling drug for both Bristol-Myers Squibb and Pfizer in the first half of 2024. Revenue: $7.1 billion That represents about 29% of BMS’ total revenue of $24 billion, according to Pfizer’s financial results. $3.9 billion Eliquis’ revenue for the first half of 2024.

BMS noted that the pricing program would not necessarily change the amount Medicare patients pay for Eliquis. Thursday’s statementHe said insurance plans and pharmacy benefit managers are likely to play a larger role.

Further impacts on the industry

CMS said the drug pricing program could have saved Medicare $6 billion if it had been in place last year. But industry lobbying group PhRMA shifted the blame elsewhere, saying the program didn’t address other sources of high drug prices, such as pharmacy benefit managers. PhRMA also argued that the design of Medicare’s price negotiation program doesn’t actually help lower drug prices.

“There is no guarantee that patients will see lower out-of-pocket costs because this legislation does nothing to curb fraud by insurers and PBMs, who ultimately decide which drugs are covered and how much patients pay at the pharmacy,” said Steve Uble, PhRMA president and CEO.

Additionally, the association disagreed that CMS’s interactions with drug companies over the past few months were true negotiations.

Still, CMS said it “engaged in good faith and thoughtful negotiations with each participating pharmaceutical company,” and increased its price proposals during the process. For half of the selected drugs, CMS and the pharmaceutical companies were able to reach an agreed-upon price, but for the other half, the pharmaceutical companies accepted the final written proposals at the end of the negotiations, CMS said.

In a statement, PhRMA noted that the IRA also has longer-term implications that have yet to be realized, including what types of drugs and treatments are pursued in research and development.

“Companies are already changing their research programs in response to this law, and experts predict that this will result in fewer treatments for cancer, mental illness, rare diseases and other conditions,” Ubl said. “Drug development is a long and complex process, and the negative impacts of these changes will not be fully realized for decades to come.”