Why it’s important: Price offers start negotiations.
Millions of Americans take the drugs selected for negotiations to treat conditions such as diabetes, cancer and heart disease. The administration identified them in August, beginning a lengthy process aimed at resulting in an agreed-upon price that would take effect in 2026, assuming the trading program survives legal challenges.
The initial round of price offers is a key step in the negotiation process. Each drugmaker has until early March to accept the offer or propose a counteroffer to the government. A series of negotiation sessions could follow and the process will conclude in August.
Health policy experts said the announcement of the initial round of bids amounted to a kind of starting gun, giving the Biden administration a chance to take an aggressive stance and test drugmakers’ willingness to accept.
The proposals help “set the tone for the rest of this back-and-forth,” said Andrew W. Mulcahy, a health economist at the RAND Corporation who has advised the Biden administration on implementing drug price negotiations.
The administration did not publicly disclose how much it was offering for each drug.
What happens next: The courts have yet to weigh in.
The price negotiation program was created by the Inflation Reduction Act, the climate, tax and health care package that President Biden signed into law in 2022. Additional drugs will be chosen for price negotiations in the coming years. The program is expected to save the federal government nearly $100 billion over a decade.
The price negotiation program is a key component of the White House’s efforts to reduce everyday costs for Americans, and it is a policy that Biden can point to as he campaigns for re-election.
“Medicare no longer accepts the prices for these drugs that pharmaceutical companies demand,” Biden said in a statement Thursday.
But the pharmaceutical industry hopes the courts will intervene to shut down the program, which drugmakers consider unconstitutional. The industry has long argued that allowing the government to negotiate prices will limit private innovation and deter companies from developing new drugs.
Lawsuits filed by drug makers, the industry’s main trade group and the U.S. Chamber of Commerce remain ongoing in courts across the country. A federal judge in Delaware heard arguments Wednesday in a case brought by AstraZeneca, the maker of a diabetes drug that was selected for price negotiations.