A recent report from the AARP Public Policy Institute highlighted how popular diabetes medications like Ozempic and Trulicity, among others, are among the top 25 drugs that Medicare has spent a significant amount on but has not yet selected for price negotiation. The report revealed that the average list prices for these drugs have nearly doubled since their introduction to the market, collectively costing Medicare close to $50 billion in 2022, ultimately affecting American taxpayers. Approximately 7 million older adults on Medicare rely on these medications, often having to cover a portion of the costs at the pharmacy or through mail order services. The report also noted that one out of five older adults tend to skip doses or avoid filling prescriptions in order to save money.
In 2024, around 53 million Americans were enrolled in a Medicare prescription drug plan. Those taking the most expensive drugs will benefit from a $2,000 cap on drug costs this year. However, AARP officials emphasized the importance of granting Medicare the authority to negotiate drug prices to benefit both enrollees and taxpayers. Leigh Purvis, a prescription drug policy principal at AARP’s public policy institute, stressed the need to discourage regular price increases by pharmaceutical companies.
Under the 2022 Inflation Reduction Act, Medicare was granted the ability to negotiate prices with drug manufacturers for a limited selection of medications. Discounts negotiated for the first round will range from 38% to 79% and will come into effect in 2026 for drugs like Eliquis, Jardiance, and Xarelto. Medicare will announce the next set of 15 drugs for negotiation by February 1, with prices effective from January 1, 2027. Another 15 drugs will be selected in 2026 for price negotiations to begin in 2028.
AARP’s report highlighted the significant impact of certain drugs on Medicare spending, with medications like Trulicity, Ozempic, Trelegy Ellipta, Biktarvy, and Xtandi being among the top spenders. The report also noted the substantial price increase of Merck’s Janumet by 293% since its market debut in 2007, contrasting with the stable list price of Epclusa, a hepatitis C drug approved in 2016.
The Pharmaceutical Research and Manufacturers of America, representing drug manufacturers, argued that studies relying solely on list prices could be misleading as they do not reflect the actual prices paid after applying rebates and insurance discounts. The trade group claimed that net drug prices have actually decreased over the past six years when these factors are considered.
Drugmakers are now required by a 2022 federal law to pay rebates to Medicare if the list prices of their drugs increase at a rate faster than inflation. This measure is aimed at controlling rising medication costs and ensuring that taxpayers and consumers receive some relief. Juliette Cubanski, the deputy director of the program on Medicare policy at KFF, a health policy nonprofit, emphasized the importance of Medicare price negotiations and rebates for drugs whose prices escalate faster than inflation.
Cubanski pointed out that while this legislation addresses price increases year over year, it does not prevent manufacturers from launching drugs at high initial prices. The focus is on containing price hikes that outpace inflation levels.
The spotlight is now on whether Medicare will target Ozempic, a diabetes drug manufactured by Danish company Novo Nordisk, for discounts. Novo Nordisk has faced scrutiny over the pricing of Ozempic and another drug, Wegovy. Last September, the company’s top executive appeared before the Senate Committee on Health, Education, Labor, and Pensions to address concerns about the list price of Ozempic.
Novo Nordisk anticipates that Ozempic, which has been available since 2017, will be among the drugs subject to negotiations for price reductions by Medicare. However, the company declined to provide details on the upcoming negotiations, citing that the list of selected drugs is not yet public. A Novo Nordisk spokesperson, Jamie Bennett, highlighted various factors that influence drug pricing, such as inflation, market dynamics, actions by government and private insurers, and the role of pharmacy benefit managers in the pricing process.
Bennett noted that while Novo Nordisk sets the list price for its drugs, this figure may not accurately represent what patients pay due to rebates, discounts, and fees provided by the company. In reality, the final price that pharmacy benefit managers, insurers, or governments pay can differ significantly from the list price. Bennett emphasized that a large majority of patients with insurance pay relatively low monthly costs for Ozempic, with 80% paying $25 or less and 90% paying $50 or less.
The complex interplay of factors affecting drug pricing underscores the need for transparency and oversight to ensure that patients and payers are not unduly burdened by escalating medication costs. Medicare’s efforts to negotiate prices and secure rebates from drugmakers serve as crucial mechanisms to promote affordability and access to vital medications for the public. As the healthcare landscape continues to evolve, ongoing vigilance and regulatory measures are necessary to safeguard the interests of patients and taxpayers alike.
