Post by : Badri Ariffin

The U.S. Medicare program has revealed a bold initiative to significantly reduce drug prices that will take effect in 2027. This move represents one of the most consequential cost-saving actions since the Inflation Reduction Act empowered the government to negotiate drug prices directly. The adjusted prices concern 15 of Medicare’s costliest prescription medications and are anticipated to lower overall spending by approximately 36%, translating to around $8.5 billion in projected savings based on current usage patterns.

Included in the new pricing roster are many widely utilized treatments. The popular GLP-1 medication, semaglutide—marketed as Wegovy for weight loss and Ozempic for diabetes—is set to decrease to $274 monthly, a significant reduction from the estimated $428 it presently costs and dramatically down from its previous $959 list price before any rebates.

Other top-selling drugs are also seeing steep price cuts. The leukemia treatment Calquence from AstraZeneca, Ofev from Boehringer Ingelheim for lung issues, and Ibrance from Pfizer for breast cancer are all expected to see price drops of over $4,000 compared to their estimated current net prices. The new rate for GSK’s inhaler Trelegy Ellipta drops to $175 from a list price of $654, while AbbVie’s Linzess for IBS has been adjusted to $136 from its previous $539 price.

This marks Medicare’s second major negotiation phase since the 2022 law enabled such discussions, which previously restricted the government from bargaining directly with pharmaceutical firms. The anticipated savings for 2027 exceed those from the initial negotiation cycle, where a Goldman Sachs analysis indicated a 22% reduction applied to a different set of 10 frequently used medications.

However, despite these reductions, many of the adjusted U.S. prices will still surpass those found in other affluent nations. Countries that implement centralized drug pricing, including various European nations, Canada, and Japan, continue to negotiate lower rates. Although the Inflation Reduction Act does not specifically include international prices in the Medicare negotiation framework, heightened scrutiny and comparisons are expected as reforms evolve.

Additionally, the government has introduced frameworks concerning "most-favored-nation" pricing models, which could refer to the lowest or second-lowest drug prices from a select group of wealthier nations. A smaller pilot initiative is being considered that benchmarks against a group of G7 countries along with Denmark and Switzerland, with adjustments made according to economic output.

With over 67 million Americans enrolled in Medicare, the ramifications of these newly established prices are likely to extend throughout the healthcare sector. Other insurers are anticipated to observe the updated figures closely as they gear up for their own negotiations with pharmaceutical companies.

The next negotiation round for Medicare, which will encompass an additional 15 prescription drugs and hospital-administered medications, is set to commence in February, perpetuating a significant transformation in the manner in which prescription drug prices are determined in the United States.

#Business News #Economy