Drugmakers Must Decide Whether to Negotiate: Timeline Explained

Manufacturers of the first 10 drugs up for Medicare price negotiations now have about a month to decide whether to participate or pull all of their products from the federal health insurance program.

The Centers for Medicare & Medicaid Services on Tuesday unveiled its long-awaited list of Medicare Part D prescription drugs subject to price-lowering talks with the agency under the Inflation Reduction Act. Affected drugmakers have until Oct. 1 to sign agreements to negotiate with the CMS over the first round of price cuts, which would go into effect in 2026.

The companies must submit manufacturer-specific data, including information on a product’s research costs, unit costs of production and distribution, and any prior financial support from the federal government to aid in the drug’s development, to the CMS by Oct. 2 to help the agency make an initial offer on a product’s maximum fair price.

The list includes Bristol-Myers Squibb Co.'s Eliquis, Eli Lilly’s Jardiance, Johnson & Johnson’s Xarelto, Merck & Co. Inc.'s Januvia, AstraZeneca’s Farxiga, Novartis’ Entresto, Amgen’s Enbrel, AbbVie and J&J’s Imbruvica, J&J’s Stelara, and Novo Nordisk’s NovoLog.

The Biden administration promoted the program as a landmark policy to lower both Medicare spending and Americans’ prescription drug costs.

1. What can drugmakers do now?

The IRA made the drug price negotiations a condition of voluntary participation in the Medicare program. Manufacturers can ask to end talks on a selected drug before or after both parties agree to a maximum fair price.

The CMS’s revised guidance clarified that companies can decline to participate in the negotiations. If they do, they’d have to withdraw their products from Medicare and Medicaid and all other federal health programs, including the Medicaid Drug Rebate Program, the Medicare Coverage Gap Discount Program, and the Manufacturer Discount Program.

Companies can face an excise tax if they refuse to participate in the negotiations or comply with the maximum fair price ultimately set by Medicare. Manufacturers that want to end an agreement over a product must submit a formal request to the agency 30 days in advance of the date the excise tax would take effect, according to the CMS guidance.

The IRS has yet to release a proposed rule on how it will implement the excise tax.

Drugmakers can also sue the government to stop the program as their peers Merck, Bristol-Myers Squibb, Astellas Pharma Inc., Johnson & Johnson, Boehringer Ingelheim, AstraZeneca and others have done.

2. What’s next for ongoing litigation?

Medicare’s timeline under its guidance is outlined to go into the next three years, but it’s possible ongoing litigation could affect it.

Major drugmakers have assembled an army of top attorneys from the nation’s most prestigious firms to take down Medicare’s drug price negotiation program, leveraging lawyer experience in health litigation, Supreme Court cases, and legal attacks against other federal programs.

Drugmakers and their allies have sued over the IRA in different courts, aiming to increase their chances of delaying the law’s implementation, but it’s unlikely the delay will occur immediately because the briefing schedules for the cases go into October.

The Pharmaceutical Research and Manufacturers of America filed its own separate suit joining drugmakers and attorneys in arguing that the drug pricing program is unconstitutional. The U.S. Chamber of Commerce filed a suit seeking a preliminary injunction against the IRA, asking the court to act before the Oct. 1 deadline.

The drugmakers and industry groups argue the law violates the First, Fifth, and Eighth Amendments and the nondelegation doctrine. Their aim is to reach the Supreme Court, legal scholars say.

3. How does this affect patients?

For now, drug costs won’t change for patients prescribed drugs on the list. If a drugmaker chooses not to negotiate, that would terminate its agreements with Medicare and Medicaid. Drugmakers withdrawing from the program would result in their drugs no longer being covered by the CMS. Medicare beneficiaries could continue to receive the drugs but would have to pay for them out-of-pocket.

For instance, if Bristol-Myers Squibb, maker of blood thinner Eliquis, were to leave the program, Medicare beneficiaries could have to pay its $561 list price—or possibly more—for a 30-day supply.

Manufacturers that withdraw from Medicare could offer patients copay coupons to help them pay for drugs, though it’s unclear how far assistance would go. Federal anti-kickback laws prohibit companies from offering coupons to Medicare beneficiaries for covered drugs.

4. When is the next major deadline?

The CMS is set on Feb. 1, 2024, to send initial offers of a maximum fair price with a justification for a selected drug to each company participating in the program. Companies then have 30 days from receiving offers of a maximum fair price to accept the offer or propose a counteroffer.

The negotiation period is set to end Aug. 1, 2024.

—From Bloomberg Law:
Lawsuits, Tax Fuel Doubt as Medicare Preps Drug Pricing Talks
Drugmakers Prep Medicare Pricing Suits for March to High Court
Drugmakers Tap Big Law Attorneys to Fight Medicare Price Program
How Drugmakers Can Dodge Medicare Price Negotiations: Explained
Pharma’s Challenge to Drug Price Excise Tax Sits on Shaky Ground
Pharma Group Seeks Early Win in Drug Price Negotiations Suit
Democrats Pitch Expanded Drug Price Negotiations Amid Lawsuits
Pharma Companies Unappeased by Medicare Price Negotiation Revamp
Medicare Shows Hand On How It Will Negotiate Drug Prices (2)
Pharma Battling Legal Precedent In Medicare Drug Price Lawsuits
Drugmakers Get Initial Medicare Price Negotiation Guidance (1)
Drug Price Negotiation Deadlines Expose Medicare To Litigation

—From Bloomberg News:
J&J, Bristol Blockbusters Targeted for Medicare Price Cuts (2)
AstraZeneca Fights Back Against Biden’s Move to Cap Drug Prices
Merck Sues US, Calling Move to Cut Drug Prices ‘Extortion’ (2)
J&J Says It Sues US to Challenge Drug-Pricing Provisions