Good Tuesday evening. Today we saw what could be a major milestone in the battle to bring down prescription drug costs. Or not. ... Details below.
Biden Administration Picks First 10 Drugs for Medicare Price Negotiations
The Biden administration on Tuesday announced the first 10 prescription drugs it has selected for unprecedented federal price negotiations with drugmakers, a milestone in efforts to reduce U.S. health care costs and improve the finances of the Medicare program.
President Joe Biden hailed the announcement, which is the result of his signature Inflation Reduction Act, passed last year. The law allows Medicare to negotiate the prices of certain prescription drugs for the first time, though it is far more limited than some Democrats had wanted. The government had previously been prohibited from engaging in such negotiations.
“For far too long, Americans have paid more for prescription drugs than any major economy. And while the pharmaceutical industry makes record profits, millions of Americans are forced to choose between paying for medications they need to live or paying for food, rent, and other basic necessities. Those days are ending,” Biden said in a statement. “There is no reason why Americans should be forced to pay more than any developed nation for life-saving prescriptions just to pad Big Pharma’s pockets.”
The list includes widely used blood thinners Eliquis and Xarelto as well as diabetes drugs Jardiance, Januvia, Farxiga, Fiasp and some related insulin products. Other drugs on the list are used to treat heart problems, autoimmune disease, cancer and psoriasis: Entresto, Enbrel, Imbruvica and Stelara (see chart below).
The list was chosen from among the top 50 eligible medications that drive the highest Medicare spending. To be eligible, a drug must have been on the market for several years without competition.
The administration said that the medications on the list account for a combined $50.5 billion in total gross costs to Medicare’s Part D prescription drug program, or about 20% of the covered costs in the year ending May 31, 2023, the period used to determine eligibility for negotiations. Eliquis alone cost Medicare more than $16 billion over the past year, while Jardiance cost more than $7 billion and Xarelto more than $6 billion.
The administration also says that Medicare enrollees taking the 10 drugs on the list paid $3.4 billion in out-of-pocket costs for them last year. It projects that up to 9 million seniors will see savings under the new law.
Overall, the new negotiations are expected to save Medicare about $100 billion over 10 years. “It’s pretty obvious that there are huge savings to be had here, for even a small number of drugs,” Dr. Benjamin Rome, a health policy researcher at Brigham and Women’s Hospital and Harvard Medical School, told CNN.
Manufacturers have until the beginning of October to agree to negotiations with the Centers for Medicare and Medicaid Services. The talks will take place this year and next, with agreed-upon new prices to be published by September 1, 2024. The prices would only take effect starting in 2026.
The Centers for Medicare and Medicaid Services is also slated to choose up to 15 more drugs for negotiations on prices to take effect in 2027 and another 15 for 2028, with up to 20 more drugs subject to negotiations each year after that. Part B drugs, which are administered by doctors, can be included as of 2028.
Companies that refuse to negotiate or reject the government’s “maximum fair price” would face a steep excise tax as high as 95% of the drug’s U.S. sales or forced withdrawal from Medicare and Medicaid. The pharmaceutical industry, the U.S. Chamber of Commerce and six individual drug companies object to those terms. They are challenging the Biden law as unconstitutional and are seeking to block the new negotiations — a fact that the president and Democrats point to proudly and are likely to continue to highlight throughout election season. Biden posted on social media Tuesday: “For years, Big Pharma blocked us from allowing Medicare to negotiate lower drug prices. Keeping prices high to increase profits and extend patents to suppress fair competition. This time, we beat Big Pharma.”
Big Pharma says the fight isn’t over, though.
Stephen J. Ubl, president and CEO of the Pharmaceutical Research and Manufacturers of America, the industry’s largest trade group, called the government announcement “the result of a rushed process focused on short-term political gain rather than what is best for patients.” He said many of the drugs on the list already have significant rebates and discounts and warned about political interference in the marketplace. “Giving a single government agency the power to arbitrarily set the price of medicines with little accountability, oversight or input from patients and their doctors will have significant negative consequences long after this administration is gone,” he said in a statement.
Manufacturers of the 10 drugs announced Tuesday said that the new law threatened their research and development efforts and could curb innovation. “Boehringer Ingelheim, which makes Jardiance, and Bristol-Myers Squibb, which makes Eliquis, argued that their drugs were being targeted because they benefit so many — leading to higher spending — and not because they charged too high of a price,” The Washington Post notes.
The bottom line: Experts have tended to side with the Biden administration regarding the legality of the new drug pricing program, but the court challenges will take time to play out. The savings from the negotiations could be significant, but they’re also still years away.
Number of the Day: 1.5
The number of job openings in the U.S. labor market fell to 8.8 million in July, a decrease of 338,000 from the month before, according to the latest Job Openings and Labor Turnover Summary (JOLTS) report from the Bureau of Labor Statistics. As the number of available jobs continues to decline month over month, the ratio of open jobs to job seekers has fallen to 1.5 — meaning there were one and a half jobs available for every person looking for work in July. That’s the lowest ratio since September 2021, although the measure is still higher than it was before the Covid-19 pandemic.
“While most Americans who want a job have one, it is not as easy to find new work as a year ago,” Bill Adams, chief economist at Comerica Bank, wrote in a note, per Axios. “Hires and quits are back to their pre-pandemic levels, and job openings are falling rapidly.” The quits rate, which gives economists a sense of how confident workers are about finding better jobs, fell to 2.3% in July, about where it was before the pandemic.
While that may be less than stellar news for job seekers, officials at the Federal Reserve worried about the effect of tight labor conditions on inflation will likely see the latest report in a more positive light. “This is a really good sign for a cooling labor market, but it’s not a cool labor market yet,” Layla O’Kane, a senior economist at Lightcast, told The New York Times. “There’s some way to go before we think we solved some of the labor market tightness.”
US Announces Another $250 Million in Military Aid for Ukraine
The Biden administration announced Tuesday that it will send an additional $250 million worth of military aid to Ukraine.
Operating under Presidential Drawdown Authority, the latest aid package is the 45th tranche of equipment provided from U.S. stocks since August 2021, the Department of Defense said. The equipment will include AIM-9 Sidewinder air-to-air missiles; additional ammunition for High Mobility Artillery Rocket Systems, known as HIMARS; 155mm artillery rounds; mine clearing equipment; anti-tank TOW missiles; armored ambulances; and more than 3 million rounds of small arms ammunition.
Ukraine has received more than $43 billion in military aid from the U.S. so far. President Biden has asked Congress to authorize another $13 billion in military aid, along with an additional $8 billion in humanitarian aid, to help Ukraine maintain its ongoing counteroffensive against Russian occupation forces for the remainder of the year, but that request faces an uncertain future as lawmakers prepare to square off over the 2024 budget this fall.
Fiscal News Roundup
- U.S. Announces First Drugs Picked for Medicare Price Negotiations – New York Times
- 5 Things to Know About the First 10 Drugs Chosen for Medicare Negotiation – The Hill
- Drugmakers, Trade Groups Push Back Against Medicare Drug Price Negotiations – Politico
- ‘Go After It’: GOP Strategists Say Republicans Need to Hit Biden on Drug Pricing – Politico
- White House Bashes GOP on Big Pharma After Unveiling Drugs Chosen for Medicare Price Negotiation – The Hill
- As Drugmakers Slam Medicare Price Controls, Wall Street Shrugs – Washington Post
- As Cost of Climate Disasters Grows, Some Profit With Catastrophe Bonds – Washington Post
- U.S. Labor Market Loses Steam as Job Openings, Resignations Decline – NBC News
- Years of IRS Inaction Leave Workers Vulnerable to Shady Tax Preparers – Washington Post
- 3M to Pay $6B to Settle Hearing-Loss Lawsuits Over Military Earplugs – Washington Post
- Biden Rule, Heeding Supreme Court, Could Strip More Than Half of U.S Wetlands’ Protections – Washington Post
- The Christian Home-Schooling Pioneer Who Helped Craft a Plan to Siphon Billions From Public Schools – Washington Post
- Conservative Groups Draw up Plan to Dismantle the US Government and Replace It With Trump’s Vision – Associated Press
- House Majority Leader Steve Scalise Diagnosed With Blood Cancer – Washington Post
Views and Analysis
- A Major Development in the Fight Against Prescription Drug Costs – Zachary B. Wolf, CNN
- Five Key Questions About Medicare's New Drug Pricing – Lisa Jarvis, Bloomberg
- The Real Reason Drugs Cost So Much — and Do Too Little – Nicholas Bagley, Bloomberg
- The High Cost of Price Controls on Eliquis and Other Drugs – Giovanni Caforio, Wall Street Journal
- Who’s Running Big Pharma’s Last Stand Against Slightly Fairer Drug Pricing – Ananya Kalahasti and Will Royce, Revolving Door Project
- Pricing a Lifesaving Drug – Robert Kuttner, American Prospect
- Fed’s Job Would Be Easier With Smarter Fiscal Policy – Clive Crook, Bloomberg
- Why the World’s Big Debt Loads May Be Here to Stay – Courtenay Brown, Axios
- Barry Eichengreen on the New Era of High Government Debt – Bloomberg Odd Lots (podcast)
- Good Riddance to Fed’s Misguided Obsession With Job Openings – Jonathan Levin, Bloomberg
- Republicans and Democrats Are Falling for the False Allure of Autarky – Catherine Rampell, Washington Post
- EV Fees Point to a Looming Policy Challenge – David Dayen, American Prospect
- How the War on Poverty Stalled – Kim Phillips-Fein, New Republic