As we have previously reported, the Inflation Reduction Act (IRA) changed the government’s treatment of certain prescription drugs under the Medicare program by directing the Secretary of Health and Human Services (HHS) to establish the Drug Price Negotiation Program (“the Program”; see here for a full recap of the Program’s structure). The IRA instructed HHS select certain “high priced” Medicare-covered drugs for inclusion in the first year of the Program. On August 29, 2023, HHS announced the 10 drugs that would be included in the first year of the Program. Of the 10 selected drugs, 3 are biologics (ENBREL, STELARA, and the FIASP and NOVOLOG products) while the remainder are small-molecule drugs.
The Program establishes “price negotiations” with the Centers for Medicare & Medicaid Services (CMS) to obtain a “Maximum Fair Price (MFP).” The MFP must be set at no more than 40-75% of the lower of (a) the drug’s non-Federal average manufacturer price for the year 2021, (b) the drug’s non-Federal average manufacturer price for the year prior to selection; or (c) the average sales price or wholesale acquisition cost for the year prior to selection. The Program requires the final MFP for drugs selected for the first year of the program be published by September 1, 2024.
On August 15, 2024, the CMS announced the negotiated MFPs for the first 10 drugs selected for Medicare Price Negotiation. The reduction in prices range from 38 to 79 percent of the 2023 listed prices for the drugs. The MFPs for the first 10 selected drugs will take effect starting January 1, 2026.
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