Medicare Drug “Negotiations” 2.0: Key Changes You Need to Know

Medicare Drug "Negotiations" 2.0: Key Changes You Need to Know

by John Conrad| Oct 3, 2024| Policy News

The Centers for Medicare & Medicaid Services (CMS) has announced significant changes to its drug price negotiation process for the Medicare program. These updates come in response to feedback from patients and pharmaceutical companies following the first round of negotiations completed in August 2023.

Key Changes

1. Earlier Engagement: CMS will meet with drugmakers before making its initial offer, allowing for more dialogue and understanding between parties.
2. Additional Negotiation Opportunities: The process now includes more chances for both CMS and pharmaceutical companies to submit offers and counteroffers over a 3.5-month period.
3. Extended Timeline: The first negotiation meeting will occur before the deadline for companies to file a counteroffer, giving manufacturers more time to prepare their responses.
4. Increased Patient Input: CMS plans to hold up to 15 patient-focused discussions in spring 2025, up from 10 in the previous round, to gather more diverse perspectives on selected drugs.

Why It Matters

These changes aim to address concerns raised by drug manufacturers about transparency and objectivity in the negotiation process. The updates are designed to make the negotiations more collaborative and inclusive while still working towards the goal of reducing drug costs for Medicare beneficiaries.

What's Next

• By February 1, 2025, CMS will select up to 15 drugs for the next round of negotiations.
• Pharmaceutical companies have until the end of February 2025 to decide whether to participate in the negotiations.
• CMS will make initial price offers on participating drugs by June 1, 2025.
• Final negotiated prices will take effect in 2027.

The Bottom Line

While these changes demonstrate CMS's willingness to refine the negotiation process, the core objective remains the same: to leverage Medicare's purchasing power to lower drug prices for older Americans. The pharmaceutical industry continues to closely watch these developments, as the outcome of these negotiations will have significant implications for their business models and drug pricing strategies.

However, it's important to note that while the intent of the program is to lower drug prices for older Americans, there has been no indication that the first round of negotiations will actually reduce patient costs. In fact, analysts are skeptical that patients will see any change in their drug costs because Pharmacy Benefit Managers (PBMs) and health plans still determine what patients will pay at the pharmacy counter. This disconnect between negotiated prices and patient out-of-pocket costs remains a critical issue in the ongoing debate over drug pricing reform.

As always, we'll keep you updated on any further developments in this important healthcare policy area.