The Centers for Medicare and Medicaid Services (CMS) has made some minor adjustments to its plan allowing Medicare to negotiate drug prices following lawsuits from unhappy pharmaceutical companies. However, CMS emphasizes its unwavering commitment to the program.
These negotiation powers were established under the Inflation Reduction Act (IRA) enacted last year, granting Medicare the ability to leverage its position as a care provider for nearly 66 million Americans to lower prices of specific high-cost medications.
In March, CMS published guidance outlining the negotiation process, which triggered swift responses in the form of lawsuits from pharmaceutical companies Merck & Co and Bristol-Myers Squibb, as well as industry organizations PhRMA and the Chamber of Commerce, who argue that the program violates the constitution.
The revised guidance includes a scaling back of the confidentiality policy during negotiations, a point raised in the lawsuits. CMS will now disclose information about the negotiation when publishing the explanation of the maximum fair price (MFP) of a drug, and drug companies have the option to publicly discuss the negotiation at their discretion. This update provides additional opportunities for drug companies and the public to engage with CMS during the negotiation process.
Any doubt regarding the government’s steadfast position on the matter was dispelled by a confrontational statement from Xavier Becerra, Secretary of the Department of Health and Human Services (HHS), which oversees CMS.
Other changes include clarifications regarding the protocol CMS will employ to determine the list of high-impact medicines. This includes considerations such as orphan drug status, the presence of genuine generics or biosimilars in the market, and exceptions for small biotech drugs.
“Pharmaceutical companies have made record profits for decades. Now, they’re lining up to block this Administration’s work to negotiate for better drug prices for our families,” said Becerra.
“We won’t be deterred. President Biden made it possible for Medicare to negotiate prescription drug prices. Today’s action is a critical step in reaching that goal.”
By September 1st, Medicare aims to finalize the initial ten drugs subject to negotiated prices. The MFPs negotiated for these drugs will be published within a year and will take effect on January 1st, 2026.
The pharmaceutical industry argues that these measures will hamper their research and development capacity and decrease the number of new medicines entering the US market.
The lawsuits thus far claim that the Medicare price negotiation process violates the Fifth Amendment by obligating companies to sell goods below market value through mandatory price-setting, rather than negotiation. Additionally, they argue that the process infringes upon the First Amendment’s right to free speech by requiring companies to sign agreements asserting that the prices set are fair.
In its complaint, PhRMA also cites a violation of the Eighth Amendment, as drug manufacturers face punitive fines if they refuse to negotiate and continue selling their products to Medicare.
According to the US government’s estimations, this measure could reduce spending on medications by $150 billion over a decade.
