CMS tweaks Medicare price negotiation, but remains defiant

The Centers for Medicare and Medicaid Services (CMS) has made some minor changes to its plan to allow Medicare to negotiate some drug prices after a series of lawsuits from disgruntled drugmakers – but has insisted that it remains committed to the programme.

The negotiation powers were part of the Inflation Reduction Act (IRA) enacted last year, and for the first time mean that Medicare will be able to use its leverage as a provider of care to almost 66 million Americans to reduce the prices of a select group of medicines that have a “high budget impact”.

The CMS published guidance in March indicating how the negotiation process would work in practice, but that triggered a swift response from pharma companies Merck & Co and Bristol-Myers Squibb – as well as industry organisation PhRMA and the Chamber of Commerce – who have filed lawsuits arguing that the programme is unconstitutional.

The changes to the guidance include a reining back of the confidentiality policy for the negotiations, which was one element cited in the lawsuits. Now, CMS will release information about the negotiation when the explanation of the maximum fair price (MFP) of a drug is published, and drug companies may choose to publicly discuss the negotiation at their discretion.

It will allow “additional opportunities for drug companies and members of the public to engage with CMS during the negotiation process.”

Any possibility that the government may be softening its stance on the issue evaporated with a combative statement by Xavier Becerra, Secretary of the Department of Health and Human Services (HHS), which oversees the CMS.

“Pharmaceutical companies have made record profits for decades. Now, they’re lining up to block this Administration’s work to negotiate for better drug prices for our families,” said Becerra.

“We won’t be deterred. President Biden made it possible for Medicare to negotiate prescription drug prices. Today’s action is a critical step in reaching that goal.”

Other changes include clarifications to the protocol CMS will use to come up with its list of high-impact medicines, including considerations around orphan drug status, the presence of “bona fide” generics or biosimilars on the market, and exceptions for small biotech drugs.

By 1st September, Medicare is scheduled to finalise the first 10 drugs that will be subject to negotiated prices. The MFPs that are negotiated for these drugs will be published within a year, and come into effect on 1st January 2026.

The pharma industry has argued that the measures will end up hitting its R&D capacity and reducing the number of new medicines coming to the US market.

So far, lawsuits have claimed that the Medicare price negotiation process falls foul of the Fifth Amendment by forcing companies to sell goods at below market value for public use by mandatory price-setting, rather than negotiation, and of the First Amendment right to free speech by making them sign agreements that state the prices being set are fair.

In its complaint, the PhRMA has also cited violation of the Eighth Amendment as drugmakers face punitive fines if they refuse to negotiate and continue selling their products to Medicare.

The US government’s own calculations estimate that the measure could trim spending on medicines by $150 billion over a decade.