WASHINGTON, D.C.: Medicare will pay an average of 36 percent less for 15 of its most expensive prescription drugs starting in 2027, the U.S. health plan said this week, estimating net savings of about US$8.5 billion after its latest round of price negotiations.
The reduced prices include a monthly cost of $274 for Novo Nordisk's semaglutide, sold as Wegovy for weight loss and Ozempic for diabetes. Medicare's recent net price for Ozempic was $428 per month, while its list price, before rebates or discounts, stood at $959.
Based on list prices, Medicare said savings across the 15 medicines ranged from 38 percent to 85 percent.
"They were gonna go to the table and try and push on those prices, and that's what they did," said William Padula, professor of pharmaceutical and health economics at the University of Southern California.
Among the drugs seeing the most significant cuts are AstraZeneca's Calquence for leukemia, Boehringer Ingelheim's lung treatment Ofev, and Pfizer's breast-cancer therapy Ibrance, each reduced by more than $4,000 from estimated net prices.
The negotiations were authorized under former President Joe Biden's 2022 Inflation Reduction Act, which, for the first time, allowed Medicare to negotiate drug prices directly. Previously, federal law barred such talks.
Bigger Savings Than Last Year
The projected 36 percent savings exceed the 22 percent reduction in net spending estimated for last year's initial round of 10 negotiated drugs, according to Goldman Sachs.
Padula said the latest selections may have allowed "more wiggle room" on pricing and that Medicare appears "more efficient with their methodology."
Other newly negotiated prices include GSK's Trelegy Ellipta inhaler at $175 per month, down from a list price of $654, and AbbVie's irritable bowel syndrome drug Linzess at $136, down from $539.
Analysts said they expect comparisons with prices in other wealthy countries, a concept sometimes referred to as "most-favored-nation" pricing and backed in the past by President Donald Trump, to feature prominently in industry reaction.
PhRMA, the pharmaceutical industry trade group, reiterated its opposition. "Whether it is the IRA or MFN, government price setting for medicines is the wrong policy for America," spokesperson Alex Schriver said.
Medicare covers more than 67 million older and disabled Americans. Lower negotiated prices could influence the broader market.
"These prices are going to come down below the existing net prices. There will be some real savings," said Sean Sullivan, professor of pharmacy at the University of Washington. "All of the other payers can see them. What is going to stop them from asking manufacturers for that same price?"
Still Costlier Than Overseas
The first batch of negotiated prices — covering 10 drugs and taking effect in 2026 — remained more than twice as high on average as prices in several other high-income countries, and in some cases five times higher.
The IRA requires Medicare to consider manufacturer data, therapeutic alternatives, and other factors, but does not mandate an international price review.
Many advanced economies negotiate drug prices centrally, supported by universal prescription coverage. The U.S. does not, and Medicare's pilot programs exploring "most-favored-nation" benchmarks are still in early stages.
The health plan will begin negotiations on another 15 prescription and physician-administered medicines in February.
