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WASHINGTON – Medicare on Tuesday announced it will negotiate prices for 10 drugs, including major blood thinners and diabetes medications, in the first round of its negotiation program created in Democrats’ drug pricing reform law.

The drugs include Bristol Myers Squibb’s blood thinner Eliquis, Boehringer Ingelheim and Eli Lilly’s diabetes drug Jardiance, Johnson & Johnson’s blood thinner Xarelto, Merck’s diabetes drug Januvia, AstraZeneca’s diabetes drug Farxiga, Novartis’ heart failure treatment Entresto, Amgen’s rheumatoid arthritis drug Enbrel, Johnson & Johnson and AbbVie’s blood cancer treatment Imbruvica, J&J’s anti-inflammatory medicine Stelara, and Novo Nordisk insulins that go by names including Fiasp and NovoLog.

The new prices will be announced on Sept. 1, 2024, and will go into effect on Jan. 1, 2026. The drugs were chosen from a list of 50 treatments that cost Medicare’s pharmacy drug benefit the most money. The selected medicines cost Medicare more than $50 billion and made up 20% of the Medicare program’s pharmacy drug costs over a one-year period, the Department of Health and Human Services said. (Read more here about the winners and losers of the selection.)

DRUG	MANUFACTURER	TOTAL COST TO MEDICARE
Eliquis	Bristol Myers Squibb	$16.5 billion
Jardiance	Boehringer Ingelheim/Eli Lilly	$7 billion
Xarelto	Johnson & Johnson	$6 billion
Januvia	Merck	$4 billion
Farxiga	AstraZeneca	$3.3 billion
Entresto	Novartis	$2.9 billion
Enbrel	Amgen	$2.8 billion
Imbruvica	Johnson & Johnson/AbbVie	$2.7 billion
Stelara	Johnson & Johnson	$2.6 billion
NovoLog/Fiasp	Novo Nordisk	$2.6 billion

Among the medicines chosen for price negotiation are treatments that have been key products for some of the largest pharmaceutical companies in the world. So far, stocks of these drugmakers have been relatively insulated from worries about the law. However, investors may become more skittish now that the products have been named — and even more so as the actual discounts for those medicines roll out.

President Biden notched the list as a Democratic win during a White House event crowded with drug pricing advocates, CMS officials, and some lawmakers, including Rep. Jan Schakowsky (D-Ill.), who had introduced negotiation legislation before.

Every Republican voted against the legislation despite its popularity with voters, Biden told attendees in the lavish East Room.

“Medicare spends $50 billion a year on these 10 drugs and American seniors are spending $3.4 billion in out-of-pocket costs,” he said. The president also attempted to tie negotiations to his so-called “Bidenomics” plan, saying to applause that the plan “is also going to lower the federal deficit.”

Despite the administration’s revelry, there’s a chance that the program will never actually go into effect. Several of the companies that make the medicines selected for the negotiation program have sued the Biden administration in courts across the country, claiming the program is unconstitutional, including Merck, Bristol Myers Squibb, Boehringer Ingelheim, Johnson & Johnson, and AstraZeneca. The U.S. Chamber of Commerce requested a preliminary injunction, which would immediately stop the law’s implementation.

“The celebration at the White House is premature because they’re attempting to avoid all of the very real world negative side effects,” said Neil Bradley, the chief policy officer at the Chamber of Commerce.

Asked earlier in the day about potential legal barriers, Neera Tanden, director of the Domestic Policy Council, downplayed the threat.

“We are confident in the law and we should recognize there is no part of the Constitution that prohibits Medicare drug negotiation,” she told reporters.

The negotiation program’s first tranche of drugs is starting with 10 drugs that patients can pick up at the pharmacy counter. The agency will negotiate an additional 15 Part D drugs in 2027, another 15 Part D and Part B drugs for 2028, and another 20 Part D and Part B drugs for 2029 and onward.

The minimum discounts Medicare will negotiate for each drug will range from 25% off a drug’s list price to 60%, depending on how long it’s been on the market.

Once the drugs are selected, CMS officials will identify drugs that are in the same therapeutic class, if any exist, and consider their net prices in the agency’s initial offer to drugmakers. The agency will also evaluate a drug’s clinical benefit, including comparative effectiveness data, whether the drug meets an unmet medical need, and the drug’s impact on “specific populations,” the guidance states.

Leerink Partners analysts don’t expect much impact to pharmaceutical companies’ bottom lines from this first tranche of negotiations, as several of the drugs selected were slated to lose their exclusivity anyway within two years of when the negotiated prices would take effect. The analysts called the program’s impact “immaterial” for most drugs in a note to investors.

Two products, in particular, came as a surprise to analysts and experts who had speculated on which drugs would appear on the list: Stelara, and the insulins. A senior administration official said that Medicare used more recent data than some analysts had access to, which may account for the differences. The official also said that other drugs that were expected to be chosen could be picked in future years.

While the law created a $35 monthly cap on Medicare beneficiaries’ out-of-pocket costs for insulin, a senior administration official said that patients could pay less than that, and some plans already have monthly costs lower than $35 per month.

The Inflation Reduction Act also imposed penalties for drugmakers that raise drug prices faster than inflation, redesigned the way that Medicare pays for Part D medications, and imposed an out-of-pocket drug cost cap for seniors.

The Medicare agency has brought on 70 staff so far to administer the negotiation program and the price hike penalties. The group’s director of the negotiations subdivision is Daniel Heider, a pharmaceutical pricing expert who came from Bristol Myers Squibb and Merck.

A top executive at Bristol Myers Squibb, which saw its blood thinner Eliquis included in the list, said that the company worries about both the fairness of the decision and its impact on the drug industry’s future decisions about R&D. Eliquis is used to prevent strokes in patients with atrial fibrillation, a heart rhythm disorder, and profits are split with Pfizer.

Catherine Owen, BMS’ general manager for commercial, said that Eliquis was being included not because of its high cost per patient, but because atrial fibrillation is a common disease in the Medicare population.

“Right now there is no requirement as written into the law that any of the savings that the government can afford from these negotiations will be passed on to patients,” Owen said in an interview with STAT.

Medicare beneficiaries who pay for a drug based on a percentage of its list price in the Part D program will instead pay based on the new negotiated price, which would result in reduced costs for those consumers.

The criteria for inclusion in the negotiation program were spelled out in the drug pricing law itself, and made the drugs that cost Medicare the most, regardless of their per-patient price, eligible for negotiation. Eliquis was by far the most costly drug to the Medicare program selected, costing $16.5 billion between June 2022 and May 2023 and was used by 3.7 million patients. The next-highest spending was on Jardiance, which cost the program $7 billion and was used by 1.6 million patients.

A Bristol Myers Squibb spokesperson said Medicare’s gross spending number doesn’t take into account rebates, discounts, and fees paid to prescription drug insurance plans.

An ATI Advisory report estimated that Eliquis made up 25% of Bristol Myers Squibb’s U.S. prescription drug sales. Other heavy hits the analysis highlighted were Jardiance, which makes up 33% of Boehringer Ingelheim’s U.S. sales, and Enbrel, which makes up 23% of Amgen’s U.S. sales.

If generic or biosimilar competitors to these drugs come on the market soon, it could affect how the negotiation process plays out.

If a generic competitor comes on the market and Medicare determines it’s being marketed by Aug. 1, 2024, then the negotiated price won’t apply to the medication in 2026. If the determination comes between Aug. 2, 2024, and March 31, 2026, then the negotiated price would still apply in 2026, but would not apply in 2027.

Sarah Owermohle contributed reporting.