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Medicare drug price negotiations start after Biden administration makes initial offers

By Tami Luhby, CNN

(CNN) — Let the negotiating begin!

The Biden administration is sending its initial offers to the drugmakers participating in the historic first round of Medicare drug price negotiations on Thursday.

The move kicks off six months of discussions between the manufacturers and the Centers for Medicare and Medicaid Services. It comes as President Joe Biden is seeking to tout his efforts to lower drug prices ahead of the November presidential election and as the pharmaceutical companies attempt to halt the negotiation process in court.

“For the first time in history, Medicare is making offers on the fair price for 10 of the most widely used and expensive drugs,” Biden said in a statement. “Medicare is no longer taking whatever prices for these drugs that the pharmaceutical companies demand.”

Negotiations will take place between now and August 1. The agreed-upon maximum fair prices will be made public by September 1 and take effect in 2026.

The first 10 drugs are Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica and Stelara, as well as Fiasp and certain other insulins made by Novo Nordisk, including NovoLog. The medications, which treat heart disease, certain cancers, diabetes and autoimmune diseases, among other conditions, cost Medicare $46.5 billion and enrollees $3.4 billion in out-of-pocket costs in 2022.

The drugmakers – which include Bristol Myers Squibb, Merck, Johnson & Johnson’s Janssen division, Novo Nordisk and AstraZeneca, among others – and industry groups have filed multiple lawsuits in federal courts across the US in hopes of stopping the effort. They each contend that the program is unconstitutional in various ways.

Several have said they were essentially forced to participate or otherwise face steep penalties or withdrawal from the Medicare and Medicaid markets.

The industry’s main lobbying group, the Pharmaceutical Research and Manufacturers of America, blasted the initial offers, arguing that the effort “continues to be an exercise to win political points on the campaign trail rather than do what’s in the best interest of patients.”

“Government bureaucrats are operating behind closed doors to set medicine prices without disclosing for months how they arrived at the price or how much patient and provider input was used,” Alex Schriver, a PhRMA spokesperson, said in a statement. “This lack of transparency and unchecked authority will have lasting consequences for patients long after this administration is gone.”

A senior administration official declined to discuss the tone of the dealings with the manufacturers, but Health and Human Services Secretary Xavier Becerra told reporters that the two parties will “have a chance to go back and forth until we agree on new pricing.”

“These are good faith, upfront negotiations, not price setting, and it will take both sides to reach a fair price,” he said.

CMS considered multiple factors when developing its initial offer, including the drugs’ clinical benefits and the price of alternatives, among others. The agency also held listening sessions so patients and others could provide input on the selected drugs. The discounts will range from at least 25% to 60% off the nonfederal average manufacturer price, depending on when the drugs were approved.

The effort was authorized by the Inflation Reduction Act that Democrats pushed through Congress in 2022. After this initial round, the Health and Human Services secretary can negotiate another 15 drugs for 2027 and again for 2028. The number rises to 20 drugs a year for 2029 and beyond.

In the first two years of negotiations, CMS will select only Part D drugs that are purchased at pharmacies. It will add Part B drugs, which are administered by doctors, to the mix for 2028.

The program is expected to save Medicare nearly $100 billion over 10 years, according to the Congressional Budget Office. It’s unclear how much enrollees will save.

This story has been updated with additional information.

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