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Alerts and Updates

CMS Issues Inaugural 10-Drug List for Drug Price Negotiation Program

October 13, 2023

CMS Issues Inaugural 10-Drug List for Drug Price Negotiation Program

October 13, 2023

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CMS’ issuance of this list included little new guidance on how the Program will unfold. However, the details of these drugs and their selection shed some light on how the Program may begin to affect industry.

On August 29, 2023, the Centers for Medicare and Medicaid Services (CMS) announced the 10 drugs that it will use for the 2023-2024 Drug Price Negotiation Program (the Program), which was established by the Inflation Reduction Act (IRA) to lower prices for high-expenditure Medicare Part B and D drugs. Though it remains to be seen how much these negotiations will decrease prices, lower drug prices mean lower revenue for manufacturers, which will likely translate into lower reimbursement for pharmacies and providers that service Medicare beneficiaries. New prices for these 10 drugs may not be finalized until September 1, 2024, and will not go into effect until January 1, 2026, but providers working with these drugs should prepare now for potential decreased revenue, and other industry actors should watch CMS’ implementation of this program for guidance on how it will affect the industry moving forward.

The Program requires CMS to negotiate maximum fair prices for select high-expenditure drugs and biological products with no generic alternatives. Previous Duane Morris Alerts (CMS Issues Initial Guidance on Medicare Drug Price Negotiation Program and Forging Ahead to the Supreme Court? Drug Company Sues U.S. Over Inflation Reduction Act Pricing) outline the Program’s contours more precisely, but in short, beginning in 2023, CMS will select a group of such drugs and biologics every year based on Part D expenditures, gather information on them from manufacturers and the public, negotiate with manufacturers to establish lower prices and then publish a maximum fair price for each drug or biologic. Once effective, maximum fair prices will remain in place until a generic or biosimilar drug enters the market or the drug or biologic becomes eligible for renegotiation (through the addition of a new indication, change of monopoly status or other material change).

CMS issued the inaugural list on August 29, consisting of the following:

  • Eliquis
  • Jardiance
  • Xarelto
  • Januvia
  • Farxiga
  • Entresto
  • Enbrel
  • Imbruvica
  • Stelara
  • Fiasp; Fiasp FlexTouch; Fiasp PenFill
  • NovoLog; NovoLog FlexPen; NovoLog PenFill

The manufacturers for these 10 drugs all agreed to participate in negotiations and provided CMS with their manufacturer-specific data. Per the Social Security Act, manufacturer data include items such as unit costs of production and distribution, data on pending and approved patent applications, R&D costs, and revenue and sales volume in the United States.

Next, CMS will hold a series of listening sessions from October 30 to November 15, including discussions with manufacturers concerning their data submissions and a public session with patients and other interested parties, which will provide patients, providers and industry players with an opportunity to describe how price changes may affect them.

Initial offers for maximum fair prices are due from CMS by February 1, 2024. Between then and August 1, 2024, CMS and the manufacturers will undergo a series of negotiations to settle on maximum fair prices. CMS must publish these prices by September 1, 2024, and explanations of those prices by March 1, 2025.

CMS’ issuance of this list included little new guidance on how the Program will unfold. However, the details of these drugs and their selection shed some light on how the Program may begin to affect industry.

First and foremost, this list demonstrates the sheer volume of money at issue. Between 8.2 million and 9 million Part D enrollees took the above drugs (depending on how many used more than one drug) from June 1, 2022, through May 31, 2023, spending a total of $3.4 billion in out-of-pocket costs. The total cost for the drugs, however, was $50.5 billion, approximately 20 percent of total Part D gross covered prescription drug costs during that time. The total number of Part D users for each drug ranged from 20,000 for Stelara to 3.5 million for Eliquis. The drug with the highest total out-of-pocket spending was Eliquis at $1.5 billion, with an average spending of $441 per enrollee. The drug with the lowest total out-of-pocket spending was Stelara at $41 million, with an average spending of $2,058 per enrollee (coincidentally, the second-highest per-enrollee spending for any drug). Given the current expenditures attributed to these drugs, any material decreases to these drugs’ prices have great potential to affect the pharmaceutical industry and related players.

Further, because these drugs are now identified, industry participants can watch them and their manufacturers to see how the next steps in the Program may affect them. For example, key industry concerns with the Program include that it may stifle generic drug competition by decreasing generic profit margins and may cause private payors to decrease their own reimbursement of these drugs to pharmacies in step with CMS. Although maximum fair prices will not be published until next year, the very placement of a drug onto this list could sway the generic market, and the same concerns shared in the public sessions could be cited by private payors to justify rate decreases.

Various pharmaceutical manufacturers, trade groups and other parties have filed eight lawsuits challenging this program. At least one court has ruled that negotiations may continue, but with ongoing litigation, significant potential remains for courts to modify the Program before CMS finalizes maximum fair prices. Plaintiffs include manufacturers Merck (Januvia), Bristol Myers Squibb (Eliquis) and AstraZeneca (Farxiga) and industry players the National Infusion Center Association, the Global Colon Cancer Association and the Pharmaceutical Research and Manufacturers of America.

Since CMS has issued little further guidance on the Program, watching how it unfolds with these 10 drugs may be key for predicting how it will affect the market and whether initial industry concerns may come to fruition. The IRA does, however, give CMS discretion to outline the Program’s details through informal guidance, without notice and comment, making it equally important to follow CMS developments as well.

Duane Morris’ Pharmacy Litigation Group will be closely monitoring these developments.

For More Information

For more information on this Alert, please contact Jonathan L. Swichar, Bradley A. Wasser, Taylor Hertzler, any of the attorneys in our Pharmacy Litigation Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.