October 03, 2023
All manufacturers of selected ten drugs agreed for price negotiation with CMS
The Inflation Reduction Act, a groundbreaking prescription drug law introduced by President Biden, has ushered in a significant milestone for Medicare. For the first time ever, Medicare is empowered to directly engage in negotiations with pharmaceutical companies to determine the prices of prescription drugs. Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & Medicaid Services (CMS), issued a statement regarding this development.
Under this initiative, the drug manufacturers of all ten medications selected for the Medicare Drug Price Negotiation Program's inaugural cycle have opted to participate in the negotiation program. The negotiations with these participating pharmaceutical companies for the chosen drugs are scheduled to take place in 2023 and 2024, with the negotiated prices set to become effective from the year 2026 onward.
This announcement represents a key step within the timeline outlined by CMS for the first cycle of the Medicare Drug Price Negotiation Program. CMS had previously released a list of ten drugs covered under Medicare Part D, designated for the initial round of negotiations, on August 29, 2023. By October 1, 2023, companies with drugs selected for the Negotiation Program had to decide whether they would commit to participating in the negotiation process for the year 2026. Moreover, participating companies were required to submit manufacturer-specific data to CMS for consideration in the negotiations by October 2, 2023. On the same date, the public was also given until October 2, 2023, to submit data related to therapeutic alternatives to the selected drugs, information regarding unmet medical needs, and insights into the impact on specific populations.
Several important upcoming dates are slated for the implementation of this program:
In the fall of 2023, CMS will extend invitations to each participating drug company with a selected medication to engage in discussions regarding their data submissions. During this period, CMS will also host patient-focused listening sessions for each selected drug. These sessions, involving patients, beneficiaries, caregivers, consumer and patient organizations, and other stakeholders, are scheduled to take place between October 30, 2023, and November 15, 2023, though they remain subject to potential changes, including postponement or cancellation.
On February 1, 2024, CMS will dispatch an initial offer outlining a maximum fair price for each selected drug, along with a justification for these offers to every participating drug company enrolled in the Negotiation Program.
August 1, 2024, marks the conclusion of the negotiation period.
By September 1, 2024, CMS will publicly disclose the maximum fair prices that have been successfully negotiated for the drugs selected for negotiation in the year 2026.
In the initial phase of drug selection for the first round of negotiations, CMS (Centers for Medicare & Medicaid Services) employed a systematic approach:
Identification of Qualifying Single Source Drugs: CMS began by identifying potential qualifying single source drugs, which include drugs that have been on the market for at least seven years or biologics for at least 11 years since their FDA approval or licensure, and for which there is no generic or biosimilar competition.
Exclusion Criteria: CMS excluded specific categories of drugs from consideration, such as orphan drugs, low-spend Medicare drugs, and plasma-derived products.
Determination of Negotiation-Eligible Drugs: CMS then determined which drugs were eligible for negotiation. The 50 qualifying single-source drugs with the highest gross Part D covered prescription drug costs were selected, excluding small biotech drugs.
Ranking of Eligible Drugs: The negotiation-eligible drugs were ranked based on their total gross Part D covered prescription drug costs.
Final Selection: From the ranked list of 50 negotiation-eligible drugs, CMS selected up to 10 drugs with the highest total gross Part D covered prescription drug costs. Any biologic that qualified for the delayed selection due to the expected entry of biosimilars were excluded from this selection.
Q: How is CMS structuring the negotiation process with the drug companies of selected drugs?
CMS is approaching, implementing the new drug law, including the Medicare Drug Price Negotiation Program, with a commitment to transparency and engagement. The negotiation process includes several key steps:
Data Submission: Drug companies with selected drugs and the public were allowed to submit data and information on the drugs chosen to CMS by October 2, 2023.
Data Review and Public Input: During Fall 2023, CMS invited participating drug companies to engage in meetings regarding their data submissions. Additionally, CMS conducted public patient-focused listening sessions between October 30, 2023, and November 15, 2023, where patients and interested parties could share their perspectives.
Initial Offer: By February 1, 2024, CMS sent an initial offer to each participating drug company, proposing a maximum fair price and providing a concise justification. Companies had 30 days to respond to the initial offer by accepting it or providing a counteroffer.
Negotiation Meetings: If an agreement on the maximum fair price was not reached through the initial offer or counteroffer, up to three negotiation meetings were scheduled during Spring and Summer 2024, concluding on August 1, 2024.
Q: How will CMS develop the initial offer?
In crafting the initial offer, CMS starts by considering evidence related to therapeutic alternatives. Other factors, such as research and development costs, production and distribution costs, and manufacturer-submitted data for the selected drug, are also considered. Specifically, CMS must consider:
Data submitted by the manufacturer, encompassing research and development expenditures, production and distribution unit costs, federal financial assistance, patent details, and market-related information.
Evidence about alternative treatments, such as the therapeutic advance offered by the selected drug compared to existing alternatives, prescribing information approved by the FDA, comparative effectiveness data, and how well the medicine addresses unmet medical needs.
Q: What are the opportunities for public input in the negotiation process?
CMS has established avenues for public engagement during the negotiation process, including:
Patient-Focused Listening Sessions: CMS hosts patient-focused listening sessions open to the public, allowing patients, beneficiaries, caregivers, and other interested parties to provide input on therapeutic alternatives to the selected drugs, the drugs' impact on unmet medical needs, and their effects on specific populations.
Data Submission: The public can submit data on therapeutic alternatives, information about unmet medical needs, and data concerning specific populations by October 2, 2023.
Q: Are drug companies voluntarily participating in the Negotiation Program?
Yes, participation in the Negotiation Program is voluntary for drug companies. A drug company's financial responsibilities under the program are linked to its voluntary participation in Medicare Part D and Medicaid. Companies manufacturing selected drugs have several options:
Participate in the Negotiation Program.
Opt out of the program and pay an excise tax on sales of the selected drug to Medicare within defined periods.
Opt out of the program and avoid the excise tax by withdrawing from the Medicare and Medicaid programs, provided they also cease participation in related programs.
Q: What happens if a participating drug company and CMS disagree on a maximum fair price?
All negotiations between participating drug companies and CMS must conclude by a specific date, which, for the first cycle of the Negotiation Program, is August 1, 2024. Companies are expected to select one of the outlined options by that date. Detailed information about the excise tax can be obtained from the Department of the Treasury, which is responsible for its implementation and enforcement.
Q: When will the negotiated maximum fair prices be available?
By September 1, 2024, CMS will publicly disclose the maximum fair prices agreed upon between CMS and participating drug companies for drugs selected in the first cycle of the Negotiation Program. These prices will become effective in 2026. CMS will also explain these agreed-upon maximum fair prices by March 2025.
Q: How does the Negotiation Program affect people with Medicare?
As mandated by law, Medicare prescription drug plans, including standalone Part D plans and Medicare Advantage-prescription drug plans, must include the selected drugs for which CMS and the participating drug companies have agreed to a maximum fair price on their formularies. CMS will closely assess any practices that may undermine access to these selected drugs for people with Medicare through its comprehensive formulary review process.
Q: Who do the negotiated maximum fair prices apply to?
In the initial phase of the Negotiation Program's first cycle, the negotiated maximum fair prices are applicable to individuals who are registered in a prescription drug scheme within the scope of Medicare Part D or a Medicare Advantage-prescription drug plan as part of Medicare Part C. This includes those enrolled in an Employer Group Waiver Plan, provided that the plan extends coverage to the specific drug in question. These maximum fair prices do not apply to individuals with Medicare who use alternative sources of prescription drug coverage, such as plans receiving the Retiree Drug Subsidy, prescription drug discount cards, or cash.
Q: Will CMS disclose information about the negotiation process?
CMS is committed to transparency and will disclose information about the negotiation process. This includes publicly explaining the negotiated maximum fair price for a selected drug and sharing additional non-proprietary information related to the negotiation process, including data submitted by other interested parties concerning the chosen medicine and its therapeutic alternatives. Generally, CMS plans to release this information once the explanation of the maximum fair price is published. Still, it may make early disclosures if a participating drug company chooses to discuss the negotiation process before that time.
The US Department of Health and Human Services (HHS) announced ten drugs for which Medicare will negotiate the prices. Medicare, the government-sponsored health care program, will directly negotiate with pharmaceutical companies, setting the stage for a potentially transformative shift in the pricing dynamics of prescription drugs.
The President Biden-backed Inflation Reduction Act made the negotiation possible, representing a meaningful step towards mitigating the financial burdens associated with healthcare costs. The cornerstone of this legislation empowers Medicare, administered through the CMS, to negotiate the pricing of prescription drugs. Notably, the recently unveiled roster includes the first set of 10 drugs under Medicare Part D's ambit, marking them for negotiation.
The timeline for these pivotal negotiations spans 2023 and 2024, with the effects of any successful negotiations slated to commence from 2026 onward. The significance of this endeavor is underscored by the substantial out-of-pocket expenditure that Medicare beneficiaries currently shoulder. The overarching objective of the Biden-Harris Administration centered around enhancing drug accessibility and reducing costs, underscores the urgency and importance of this initiative.
Embedded within the negotiation process are various key considerations. Beyond the economic factors, the clinical utility of the chosen drugs, their capacity to address unmet medical needs, and their impact on the Medicare beneficiary demographic are all integral facets. This comprehensive approach also considers the multifaceted aspects of drug development, encompassing research, production, distribution, and associated costs.
The impending changes promise to significantly enhance the affordability of crucial medications for those dependent on Medicare.
The drugs primed for initial negotiation are as follows:
Fiasp; Fiasp FlexTouch; Fiasp PenFill; NovoLog; NovoLog FlexPen; NovoLog PenFill
These selected drugs collectively accounted for a significant share of $50.5 billion in gross covered prescription drug costs under Part D. This cumulative expenditure constituted approximately 20% of the total Part D gross covered prescription drug costs for the period ranging from June 1, 2022, to May 31, 2023. An essential aspect of transparency and accountability, CMS is scheduled to unveil the negotiated prices for these drugs by September 1, 2024, with these revised prices slated to take effect starting January 1, 2026.
The roadmap ahead is ambitious, with the Inflation Reduction Act charts the course for further progress. In the forthcoming years, CMS aims to extend negotiation coverage to an increasing number of drugs. The trajectory includes up to 15 more drugs for Part D in 2027, followed by a similar number for Part B and Part D in 2028. Subsequent years are projected to include up to 20 additional drugs each year, as stipulated by the provisions of the Inflation Reduction Act.