Medicare’s Reduced Drug Payments in 2027

Overview of Price Negotiations

In 2027, Medicare will significantly decrease its payments for 15 medications, which include essential treatments for cancer, asthma, and metabolic conditions. This adjustment follows the completion of the second annual round of price negotiations mandated by the Inflation Reduction Act (IRA). According to the Centers for Medicare and Medicaid Services (CMS), the finalized prices announced on Tuesday would have led to a 44% reduction in overall spending, amounting to $12 billion, if applied in 2024. Beneficiaries could have seen their out-of-pocket costs decrease by $685 million.

Details of Negotiation Outcomes

The announcement marks the conclusion of three negotiation rounds involving CMS and pharmaceutical companies, where both parties exchanged offers and counteroffers supported by evidence. Prices for seven drugs were established based on revised counteroffers from drug manufacturers, while in an additional seven instances, the companies accepted CMS’s final written offers. Notably, the price for semaglutide, the active ingredient in Novo Nordisk’s popular weight loss medication Wegovy and diabetes treatment Ozempic, was initially disclosed during a press conference at the Oval Office with former President Donald Trump. The administration aims to align U.S. drug prices with those in other developed countries.

List of Negotiated Drugs and Prices

The drugs involved in this latest round of negotiations include:

– **Semaglutide** (Novo Nordisk) – Negotiated Price: $274, List Price: $959, Expected Gross Covered Cost in 2024: $15.2 billion, Enrollees: 2.3 million
– **Trelegy Ellipta** (GSK) – Negotiated Price: $175, List Price: $654, Expected Gross Covered Cost: $5.3 billion, Enrollees: 1.3 million
– **Xtandi** (Astellas/Pfizer) – Negotiated Price: $7,004, List Price: $13,480, Expected Gross Covered Cost: $3.4 billion, Enrollees: 35,000
– **Pomalyst** (Bristol Myers Squibb) – Negotiated Price: $8,650, List Price: $21,744, Expected Gross Covered Cost: $2.2 billion, Enrollees: 14,000
– **Ofev** (Boehringer Ingelheim) – Negotiated Price: $6,350, List Price: $12,622, Expected Gross Covered Cost: $2.1 billion, Enrollees: 24,000
– **Ibrance** (Pfizer) – Negotiated Price: $7,871, List Price: $15,741, Expected Gross Covered Cost: $2 billion, Enrollees: 16,000
– **Linzess** (AbbVie) – Negotiated Price: $136, List Price: $539, Expected Gross Covered Cost: $2 billion, Enrollees: 632,000
– **Calquence** (AstraZeneca) – Negotiated Price: $8,600, List Price: $14,228, Expected Gross Covered Cost: $1.7 billion, Enrollees: 15,000
– **Austedo** (Teva) – Negotiated Price: $4,093, List Price: $6,623, Expected Gross Covered Cost: $1.7 billion, Enrollees: 27,000
– **Breo Ellipta** (GSK) – Negotiated Price: $67, List Price: $397, Expected Gross Covered Cost: $1.4 billion, Enrollees: 626,000
– **Xifaxan** (Salix) – Negotiated Price: $1,000, List Price: $2,696, Expected Gross Covered Cost: $1.2 billion, Enrollees: 105,000
– **Vraylar** (AbbVie) – Negotiated Price: $770, List Price: $1,376, Expected Gross Covered Cost: $1.1 billion, Enrollees: 118,000
– **Tradjenta** (Boehringer Ingelheim) – Negotiated Price: $78, List Price: $488, Expected Gross Covered Cost: $1.1 billion, Enrollees: 274,000
– **Janumet** (Merck & Co.) – Negotiated Price: $80, List Price: $526, Expected Gross Covered Cost: $1.1 billion, Enrollees: 239,000
– **Otezla** (Amgen) – Negotiated Price: $1,650, List Price: $4,722, Expected Gross Covered Cost: $1 billion, Enrollees: 31,000

Implications of the Inflation Reduction Act

The Inflation Reduction Act facilitated the first instance of price negotiations for Medicare, which began covering pharmacist-dispensed drugs in 2006 under Part D. The prices established in the first negotiation round, covering ten drugs, are set to take effect in 2026, followed by the current 15 drugs in 2027. To qualify for these negotiations, drugs must be classified as “single-source,” indicating they are typically branded products without competition from generics or biosimilars.

Future Negotiations

Looking ahead, Medicare will negotiate prices for an additional 15 high-expenditure drugs in 2026. This will extend beyond pharmacist-dispensed medications covered under Part D to include physician-administered drugs under Part B, potentially encompassing high-cost biological drugs that require intravenous delivery.