CMS announces “top 10” costly drugs list selected for price negotiations

Two weeks ago, the Centers for Medicare & Medicaid Services (CMS) announced the first 10 brand name medications that it will negotiate Medicare Part D prices directly with drug manufacturers to take effect starting in 2026. Several of these medications are commonly prescribed by primary care physicians and were discussed in American Family Physician’s STEPS (Safety, Tolerability, Efficacy, Price, Simplicity) New Drug Reviews feature from 2007 to 2020. Each drug received U.S. Food and Drug Administration (FDA) approval for at least one indication before September 2016 and currently faces no generic competition.

Apixaban (Eliquis)

Empagliflozin (Jardiance)

Rivaroxaban (Xarelto)

Sitagliptin (Januvia)

Dapagliflozin (Farxiga)

Sacubitril/valsartan (Entresto)

Etanercept (Enbrel)

Ibrutinib (Imbruvica)

Ustekinumab (Stelara)

Insulin aspart (Novolog/Fiasp)

Although Medicare began paying for prescription drugs in 2006, the legislation that created the Part D drug benefit prohibited the federal government from using its purchasing power to negotiate prices directly with pharmaceutical companies, as most government health programs in other countries do from the time of market entry. This changed with the passage of the Inflation Reduction Act in August 2022, which not only gave CMS the authority to negotiate prices of selected brand-name drugs, but also penalizes companies that increase prices faster than inflation and caps Medicare beneficiaries’ annual out-of-pocket drug spending starting in 2024.

Manufacturers have until October 1, 2023 to decide if they will participate in negotiations with CMS to establish a “maximum fair price” for the designated drugs in Medicare Part D or accept financial penalties for not doing so. Negotiations that will take place over the next year will ultimately establish a discounted price that is at least 25 to 60% lower than the drug’s list price. Collectively, the federal government is expected to save $100 billion over the next decade. That’s because a small number of brand-name drugs have an outsized budget impact, with the 10 most expensive drugs accounting for 22 percent of gross Medicare Part D spending in 2021. In addition, there may be “spillover” effects from negotiated lower prices because competitors in the same therapeutic class may decide to lower their prices or risk being left off of Part D drug formularies.

Given potentially large financial impacts on the companies involved (Eliquis, Jardiance, and Enbrel comprise 23 to 33 percent of U.S. prescription drug sales of their respective manufacturers, according to STAT), the pharmaceutical industry has already filed multiple lawsuits seeking to stop price negotiations before they take effect in 2026. Although the industry warns that less revenue could discourage innovation and new drug development, the nonpartisan Congressional Budget Office has estimated that price negotiations would have a small impact on FDA new drug approvals, with 15 fewer drugs approved over the next 30 years out of about 1300 projected.

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This post first appeared on the AFP Community Blog.