Despite legal challenges from a growing number of drugmakers, the Biden administration on Tuesday is expected to announce the 10 drugs Medicare will pay less for beginning in 2026, a major step in its program to cut Medicare spending on a handful of high-price medicines.
Wall Street experts already generally agree on which medicines will end up on Medicare’s list, and don’t expect big moves in the stock prices of drugmakers on Tuesday morning. Investors have had a year since the Medicare drug price negotiation program was announced to adjust their expectations, and shares of the companies with drugs likely to be on the list are already depressed.
The announcement, however, will serve as a reminder of the impending start date of a program that drugmakers say poses a major threat to their business model, and has already begun to weigh on valuations across the sector.
Companies with medicines expected to be on the list include
Bristol-Myers Squibb
(BMY),
Pfizer
(PFE),
Merck
(MRK),
Eli Lilly
(LLY),
Amgen
(AMGN), and
Johnson & Johnson
(JNJ). As of last week, six drugmakers and two industry groups have filed lawsuits challenging the program, with the latest announced Friday by
AstraZeneca
(AZN).
The drug negotiations, which Congress voted into law as part of the Inflation Reduction Act last year, will allow Medicare for the first time to negotiate the prices of certain prescription drugs. It should offer relief to programs like the Medicare Part D prescription drug benefit, which spent $120 billion on drugs in 2018, up from $74 billion in 2009.
The pharmaceutical industry says that the lower prices would pose a threat to their ability to develop new medicines.
Early Tuesday, the Centers for Medicare and Medicaid Services, which oversees Medicare, is set to announce the 10 drugs whose prices will be the first to be negotiated, with new prices going into effect in 2026.
The blood thinner Eliquis, sold by
Bristol-Myers Squibb
and Pfizer, is widely expected to be at the top of the list. Medicare’s Part D prescription drug benefit spent $12.6 billion on Eliquis in 2021, a quarter of the program’s gross spending that year, according to a KFF report.
Other drugs generally expected to be on the list include Merck’s diabetes medicine Januvia, Eli Lilly’s diabetes medicine Jardiance, Pfizer’s cancer medicines Xtandi and Ibrance, Amgen’s Enbrel, which treats certain autoimmune conditions, and a cancer medicine from
AbbVie
(ABBV) and Johnson & Johnson called Imbruvica.
Eligibility for negotiation depends on Medicare Part D’s spending on the drug, plus whether the drug will face competition from a generic or biosimilar medicine before 2026, among other factors. Medicines with generic or biosimilar competitors are exempt from negotiation, though some experts say that drugs whose patents are set to expire before 2026, but do not yet have generic competitors, may still be on the list.
Goldman Sachs analysts, in a note on Thursday, laid out the other drugs they expect to round out the 10:
Novartis’s
Entresto (NVS), Bristol’s Pomalyst, and Johnson & Johnson’s Invega Sustenna. Another prediction, from an academic paper published in March in the Journal of Managed Care + Specialty Pharmacy, includes Johnson & Johnson’s Xarelto, AstraZeneca’s Symbicort, and
GSK’s
(GSK) Breo Ellipta. A list from BMO Capital Markets analyst Evan Siegerman published on Thursday included Xarelto, Lilly’s Trulicity, and
Astellas Pharma’s
(ALPMY) Myrbetric, all of which have patents that expire before 2026, but do not yet have generic competitors.
Once CMS has published the list, companies have a month to agree to participate in the negotiation program. If a company chooses to opt out, it will need to stop selling all of its medicines to Medicare and Medicaid, or to pay very steep financial penalties. Negotiations between the companies and CMS over the 2026 price of the medicines will run from February to August of 2024.
It’s not yet clear how far the prices for the listed drugs will fall in 2026, or what impact those lower Medicare prices will have on other payers. For investors, the question is whether industry lawsuits or political developments could halt the rollout of the negotiation program before the new prices go into effect, or whether the program will have a long-term impact on the industry.
Write to Josh Nathan-Kazis at [email protected]
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