Despite industry lawsuits, drugmakers have agreed to negotiate the prices of prescription drugs with Medicare for the first time in the U.S.

Setting the stage: The Biden administration announced the first ten drugs up for price negotiation over a month ago under the Inflation Reduction Act.
* The list includes drugs for arthritis, cancer, diabetes, heart failure, and blockbuster blood thinners Xarelto and Eliquis.
* All the companies manufacturing these drugs have signed agreements asserting their willingness to negotiate, despite more than a third of these companies suing the federal government.

The impetus: Drugmakers face a tough choice – either negotiate, face steep fines, or withdraw their products from the Medicare and Medicaid markets.
* A Merck spokesperson voiced concerns over the program but acknowledged the devastating consequences of withdrawing their products for the millions of Americans who rely on them and for abandoning nearly half of the U.S. prescription drug market.

Potential impacts: The Congressional Budget Office report suggests that drug pricing provisions will have a modest impact on new drugs’ market entry.
* These provisions could potentially save Medicare around $237 billion over 10 years, with $98.5 billion estimated to come from drug price negotiation.

Looking ahead: The administration will announce its proposed prices for the first group of drugs on February 1, 2023, giving drugmakers 30 days to respond.
* The final negotiated prices will be declared in September 2024 and will take effect in 2026.
* Under the Inflation Reduction Act, Medicare can negotiate the prices of more drugs each year, with up to 20 drugs eligible for negotiation by 2029.

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