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The Biden administration sent its first bid to the manufacturers of 10 drugs involved in Medicare drug price negotiations, HHS Secretary Xavier Becerra said Thursday.

"Today is another milestone on the march to ensure people with Medicare get fair prices for prescription drugs," Becerra . "I am confident that this process will lead to lower prices, putting an end to exorbitant price gouging by pharmaceutical companies."

"Allowing Medicare to negotiate drug prices is just one tool we're using to lower prices thanks to the president's lower-cost prescription drug law," he added. "From capping insulin at $35 per month, to making drug companies pay a rebate for raising their prices faster than inflation, to capping out-of-pocket costs in Part D, we are delivering on [our] promise" to lower drug prices for Americans.

The prescription drug law Becerra referred to was the Inflation Reduction Act (IRA), which contained a provision allowing Medicare to negotiate the price of certain drugs. These drugs include medications in which at least 7 years -- 11 years for a biologic -- have elapsed between the FDA's approval or licensure of the drug or biologic, and for which there is no generic or biosimilar competition. In addition, the drugs or biologics are among those with the highest total gross Part D-covered prescription drug costs.

In August, the administration released its list of the first 10 drugs subject to negotiation, which included:

• Apixaban (Eliquis): a blood thinner used to prevent stroke and blood clots
• Empagliflozin (Jardiance): a drug used to treat type 2 diabetes and heart failure
• Rivaroxaban (Xarelto): a blood thinner used to treat and prevent blood clots and reduce risks for patients with coronary or peripheral artery disease
• Sitagliptin (Januvia): a drug for treating type 2 diabetes
• Dapagliflozin (Farxiga): a drug for treating type 2 diabetes, heart failure, and chronic kidney disease
• Sacubitril/valsartan (Entresto): a drug for patients with chronic heart failure
• Etanercept (Enbrel): a drug for moderate to severe rheumatoid arthritis
• Ibrutinib (Imbruvica): a drug that is used to treat chronic lymphocytic leukemia/small lymphocytic lymphoma
• Ustekinumab (Stelara): a biologic that treats Crohn's disease, ulcerative colitis, psoriasis, and psoriatic arthritis
• Insulin aspart injection (NovoLog, among others): a drug for patients with diabetes mellitus

In terms of total Medicare Part D costs over the last year (June 2022 to May 2023), apixaban cost the most, at $16.5 billion for the 3.7 million enrollees taking the medication (total cost of $4,448 per enrollee). This was followed by empagliflozin ($7.1 billion), rivaroxaban ($6.0 billion), and sitagliptin ($4.1 billion).

Thursday was the deadline for the Centers for Medicare & Medicaid Services (CMS) to share its initial maximum fair price offers with a justification, and now companies will have 30 days to accept or suggest a counter-offer.

The negotiation period is slated to end Aug. 1, 2024. By Sept. 1, CMS will publish the maximum fair prices that the agency has negotiated for these 10 drugs, and the negotiated prices will take effect beginning Jan. 1, 2026. Companies that decide not to participate in the negotiations will have to pay an excise tax, which starts at 65% of a product's U.S. sales and rises by 10% every quarter to a maximum of 95%. The only way to avoid the excise tax is to withdraw the affected drugs from Medicare and Medicaid coverage.

Once implemented, the negotiated prices will lower costs for up to 9 million seniors, currently paying up to $6,497 in out-of-pocket costs annually for their medications, according to the administration.

The 10 drugs chosen for negotiation by CMS -- single-source brand-name drugs with no therapeutically equivalent generic or biosimilar competition -- were targeted for negotiation based on their total expenditures in the Medicare Part D program. These drugs are either costly, widely used, or both.

Looking ahead, CMS will choose up to 15 additional drugs for price negotiation for 2027, up to 15 more drugs (to include drugs covered under Medicare Part B) for 2028, and up to 20 more drugs for price negotiation each year after that, as stated in the IRA.

Not surprisingly, drug manufacturers were not happy with Thursday's announcement.

"This continues to be an exercise to win political points on the campaign trail rather than do what's in the best interest of patients," Alex Schriver, senior vice president of public affairs at the Pharmaceutical Research and Manufacturers of America, said in a statement. "Government bureaucrats are operating behind closed doors to set medicine prices without disclosing for months how they arrived at the price or how much patient and provider input was used. This lack of transparency and unchecked authority will have lasting consequences for patients long after this administration is gone."

But Patients for Affordable Drugs, an organization for patients concerned about high drug prices, disagreed, praising the administration's action. "We hear from patients every day who are grappling with the crushing weight of exorbitant drug prices, forced to make impossible decisions between their health and financial well-being," said Merith Basey, MSc, the group's executive director. "By advancing this process of direct negotiation with drug companies, CMS is helping ensure that fewer people will have to make these tough choices ... Today marks a historic milestone in the fight to lower drug prices for everyone."

Also on Thursday, the administration released several reports on prescription drug costs, including comparing the cost of prescription drugs in the U.S. with the cost for the same drugs in other developed countries.

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