A major development in the fight against prescription drug costs

Analysis by Zachary B. Wolf, CNN

(CNN) — While much of the oxygen in the US political conversation is sucked up by former President Donald Trump’s forthcoming trials, there is other news to report.

What could in hindsight be a milestone moment occurred Tuesday in Washington when the government announced the first 10 prescription drugs for which Medicare will negotiate prices.

Driving down the cost of prescription drugs has been a priority of every recent president and using Medicare’s considerable power to achieve savings has more specifically been the goal of Democrats.

This new power will take time to implement and must still survive multiple court challenges by pharmaceutical companies.

But it is a development that could ultimately affect every American who enrolls in Medicare’s prescription drug benefit.

According to CNN’s Tami Luhby, the first 10 drugs subject to these negotiations are: Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica and Stelara, as well as Fiasp and certain other insulins made by Novo Nordisk, including NovoLog.

The medications treat heart disease, certain cancers, diabetes and autoimmune diseases, among other conditions.

These drugs cost Medicare enrollees big money – $3.4 billion in out-of-pocket costs last year. The enrollees who didn’t receive additional financial assistance shelled out as much as $6,500 on average, according to Luhby’s report. But she also notes that these drugs “accounted for $50.5 billion, or about 20%, in total Part D gross covered prescription drug costs” over the past year.

I talked to Luhby by email to learn more about how this new negotiating power came about, how it has eluded multiple recent presidents and what we know about how it will actually drive down prices and affect the financial position of Medicare.

Our conversation, conducted by email, is below:

How did this new negotiating authority happen?

WOLF: Presidents have been trying (and failing) to get this type of power for decades. How long has this been an issue and how did President Joe Biden finally get it?

LUHBY: Medicare only started covering drugs in 2006, thanks to Medicare Part D, which was created by Congress and signed into law by President George W. Bush in 2003. But the legislation specifically barred Medicare from being able to negotiate prices.

Democrats were trying to add a drug benefit – and allow Medicare to negotiate drug prices – as far back as former President Bill Clinton in 1993. More recently, House Democrats passed a more ambitious effort to allow the Health and Human Services secretary to negotiate drug prices in 2019, but it didn’t go anywhere.

For decades, the very powerful pharmaceutical industry – which donates lots of money to lawmakers and other politicians – was successful in blocking any attempts allowing Medicare to negotiate drug prices.

But the industry lost that battle last year when Democrats pushed through the Inflation Reduction Act, which gave Medicare the power to negotiate drugs for the first time ever. But it’s much more limited than the House bill.

Why these 10 drugs?

WOLF: Will the list of drugs expand?

LUHBY: The criteria for selecting the drugs was laid out in the Inflation Reduction Act.

The initial set of drugs was chosen from the top 50 eligible Part D drugs that have the highest total expenditures in Medicare. Only medications that have been on the market for several years without competition are eligible.

After the initial round, the Health and Human Services secretary can negotiate another 15 drugs for 2027 and 15 more for 2028. The number rises to 20 drugs a year for 2029 and beyond.

In the first two years of negotiations, CMS will select only Part D drugs that are purchased at pharmacies. It will add Part B drugs, which are administered by doctors, to the mix for 2028.

WOLF: My impression is that Americans pay more for medical care and for prescription drugs than people in other countries. Is that true and will this new power fix the problem?

LUHBY: Yes, America generally pays more for medical care and prescription drugs than its peer countries – often much more. For instance, a one-month supply of the drug used in the diabetes medication Ozempic and its sister drug for weight loss Wegovy in the US costs quadruple the sales price in Germany and 4.5 times the price in the Netherlands, according to a recent study by KFF. Note: Those are the list prices, not necessarily what patients pay.

The price differentials stem largely from the greater involvement of other countries’ governments in their health care systems, which also includes setting prices. But there are tradeoffs – Americans, at least those who can afford it, may have better access to the latest treatments and medical technology.

Why is this so controversial?

WOLF: Since the government is the single largest health care spender, why shouldn’t the government have the ability to negotiate drug prices?

LUHBY: The Biden administration and experts argue that Medicare sets the reimbursement rates for many other services, such as hospital care. Now it is extending that power to drug prices.

But drugmakers and their supporters have filed eight lawsuits so far seeking to halt the program, saying it’s unconstitutional. The administration says there’s nothing in the Constitution banning Medicare from negotiating drug prices.

Do drug companies have compelling arguments?

WOLF: What are drugmakers arguing in their lawsuits?

LUHBY: They each contend that the program is unconstitutional in various ways.

Among the arguments are that the program violates the Fifth Amendment’s “takings” clause because it allows Medicare to obtain manufacturers’ patented drugs, which are private property, without paying fair market value under the threat of serious penalties.

Plus, the negotiations process violates the First Amendment, the challengers say, because it coerces manufacturers into saying that they agree to the price that the government has dictated and that it’s fair.

Another argument is that the process violates the Eighth Amendment by levying an excessive fine if drugmakers refuse to negotiate and continue selling their products to the Medicare market.

How much money will this save the government?

WOLF: Can this new power change the financial outlook for Medicare?

LUHBY: The program is expected to save Medicare $98.5 billion over 10 years, according to the Congressional Budget Office.

The extent of the savings remains to be seen. The pharmaceutical industry argues that many of the medications on the list already have large rebates and discounts due to negotiations that currently occur in Part D insurance plans.

But some experts say Medicare’s new power will make a difference.

CMS Administrator Chiquita Brooks-LaSure told me that drug price negotiation is part of the strategy to make sure Medicare is sustainable.

How much will it save people?

WOLF: How much will it save the people buying these prescription drugs?

LUHBY: That’s harder to pin down. Brooks-LaSure pointed to other provisions of the Inflation Reduction Act that she said will have a big impact on patients’ spending. She highlighted the upcoming $2,000 cap on annual out-of-pocket costs in Medicare Part D, which takes effect in 2025.

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