Medicare Slashes Drug Costs for 2027 After Second Negotiation Round
- 4 days ago
- 2 min read
The U.S. Medicare health plan announced substantial savings this week, projecting a 36% cut in spending on 15 of its costliest drugs compared with recent annual expenditures. This reduction, resulting from the second round of price negotiations, is expected to save Medicare approximately $8.5 billion in net covered prescription costs, with the new prices set to take effect in 2027.
The annual price negotiations were made possible by President Joe Biden's signature 2022 Inflation Reduction Act (IRA), which ended the legal ban on Medicare negotiating directly with drug manufacturers. Analysts note that the projected 36% savings are greater than the 22% savings achieved during the first round of negotiations last year, suggesting Medicare is "getting more efficient with their methodology". The new prices are anticipated to save taxpayers $12 billion and reduce Medicare enrollees’ out-of-pocket costs by $685 million in 2027.
Among the high-profile medications affected is Novo Nordisk's popular GLP-1 drug semaglutide, sold as Wegovy (for weight loss) and Ozempic (for diabetes). The newly negotiated monthly price for semaglutide is set at $274, a significant drop from its list price of $959 a month. This represents a discount of about 71% from the list price.
Several cancer and chronic disease drugs received the steepest cuts. AstraZeneca's leukemia drug Calquence, Boehringer's lung treatment Ofev, and Pfizer’s breast cancer drug Ibrance all experienced cuts of over $4,000 from estimated net prices. Other negotiated prices include GSK's asthma inhaler Trelegy Ellipta at $175 (down from $654) and AbbVie's irritable bowel syndrome medicine Linzess at $136 (down from $539). Overall, savings on the 15 drugs ranged from 38% to 85% based on non-discounted list prices.
The pharmaceutical industry, represented by PhRMA, continues to oppose these government price-setting efforts, stating it is "the wrong policy for America". Despite the significant domestic cuts, experts have noted that the negotiated Medicare prices may still be higher than prices drugmakers agree to in other high-income countries, though the IRA does not require international price reviews. However, professors suggest that these "real savings" will be visible to other payers, who may subsequently pressure manufacturers for the same prices.
The 15 selected drugs accounted for $42.5 billion, or 15%, of total Medicare Part D spending in 2024. Medicare covers over 67 million people, including those aged 65 and older and individuals with disabilities. The next round of price talks is scheduled to begin in February.
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Keywords: Medicare
Medicare
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