Research experts at the Brookings Institution in Washington, D.C., analyzed the savings estimates provided by CMS for its drug price negotiations and compared them with the institution’s own estimates.
The first 10 drugs selected for price negotiations under the Inflation Reduction Act (IRA) of 2022 were recently announced and researchers from the Brookings Institution compared savings estimates provided by the Centers for Medicare and Medicaid Services (CMS) with their own. After using publicly available data to find their estimates, researchers confirmed the consistency of CMS in drug price negotiations and savings estimates. However, they found that 51.4% of estimated savings, over $3 billion, were for just 3 of the 10 drugs selected.
“The much anticipated first set of negotiations on the prices of brand-name prescription drugs for the Medicare Part D program has been completed. The 2026 Maximum Fair Prices for 10 selected drugs have been established. The Inflation Reduction Act included provisions that enabled the secretary of the Department of Health and Human Services to negotiate the prices for certain prescription drugs by amending the ‘non-interference clause’ in Medicare Modernization Act that forbid Medicare from negotiating prescription drug prices,” wrote authors of the report published by the Brookings Institution.1
From the introduction of the IRA in 2022 to the price negotiations themselves and their inevitable start date beginning January 1, 2026, it has been and will be a slow burn before patients begin reaping the discounted benefits offered under the IRA. However, CMS’s recent announcement of the completion of drug price negotiations is a major first step to bringing down the prices of life-saving drugs.
Before exploring the estimated savings, it’s important to understand what drugs were selected and the criteria they were obligated to meet. All drugs had to be single-sourced products, with small molecule products being on the market for at least 9 years and biologics being on the market for at least 13 years by the negotiations’ activation date on January 1, 2026.1
Researchers estimated Medicare’s net spend on the 10 drugs in 2023 and CMS’s reported savings estimates for when the IRA goes into effect in 2026. | image credit: kvladimirv / stock.adobe.com
After almost a year of deliberation and planning, in August of 2023, CMS announced the 10 drugs that would enter price negotiations: Januvia; multiple Novo Nordisk variations to treat diabetes, including Fiasp; Farxiga; Enbrel; Jardiance; Stelara; Xarelto; Eliquis; Entresto; and Imbruvica.2
READ MORE: Prices Released for First 10 Drugs Selected in Medicare Negotiations
“In this paper, we provide an estimate of the savings realized through the negotiation process. CMS has reported that the reduction in spending associated with the new negotiated prices amounts to $6 billion evaluated at 2023 volumes of prescriptions. Our analysis examines the differences in the prices that were realized through negotiation by Part D plans and those obtained through the IRA’s negotiation program for the 10 drugs selected for those negotiations,” continued authors of the report.1
Researchers estimated Medicare’s net spend on the 10 drugs in 2023 and CMS’s reported savings estimates for when the IRA goes into effect in 2026. They also used public data from government entities such as available CMS data and Medicare Part D gross sales from the Congressional Budget Office.
Their key findings included a savings estimation of $6.37 billion—consistent with the CMS estimation—with $3.28 billion accounting for Enbrel, Stelara, and Eliquis. They also pointed out that negotiations led to drugs falling below the statutory ceiling prices, listing Januvia as an example for its 18% increase in manufacturer rebate price. Finally, they realized that “the largest price concessions were obtained for drugs that had the lowest pre-IRA rebates because of limited pre-IRA competition,” specifically for Stelara, Enbrel, and Imbruvica.1
“We believe the estimates will most often represent lower bounds on the impact of allowing the government to negotiate some prices. The estimates are not meant to provide a full budgetary impact of the IRA but to focus on how allowing the government to negotiate affects prices relative to relying solely on Part D prescription drug plans,” they wrote.1
They found that negotiations rely on the original Part D drug plans, giving the government less power than was once realized to yield massive savings for patients using Medicare. Aside from the success of researchers’ estimates, and CMS’s consistency with their estimations, researchers noted that future negotiations will rely heavily on market trends of the selected drugs.
“The estimates show that the government negotiations are especially significant for drugs where market forces were most limited and therefore had the least impact on producing price concessions. This was the intent of the policy design,” they wrote. However, based on CMS’s ability to estimate savings and appropriately use their power to negotiate drug prices, the authors support CMS’s execution of terms laid out in the IRA.
“Our methods of analysis are similar to those used by CMS, and so it is notable that the reliance on publicly available information leads us to roughly the same estimates of aggregate savings and the percentage reduction net spending as those reported by CMS. Thus, the estimates measure the ability of CMS to effectively negotiate prices and point to what can be expected from future rounds of negotiation as the program grows,” they concluded.1
READ MORE: Q&A: Understanding Future Impacts of the IRA
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