2023 Halftime Report — Price Negotiation, PBM Legislation, Med Shortages

Jul 25, 2023
Deborah Abrams Kaplan

Bipartisan appetite for PBM issues. Medicare drug negotiations. Medication Shortages. They have been fodder for healthcare headlines, hashtags and tweets so far this year. They are also likely to have some staying power during the second half of 2023 and spillover into 2024. Here’s a look at three topics and developments in healthcare and how they might play out over the next six months and beyond.

1. The rollout of Medicare price negotiation

Pharmaceutical companies were not happy when the Inflation Reduction Act (IRA) allowed Medicare to negotiate prices on some drugs it covered. The process starts this year on Sept. 1, when CMS will publish its list for the first 10 Medicare Part D drugs. In March 2024, manufacturers will receive CMS’ offer for a maximum fair drug price to accept or counter, and on Sept. 1, 2024, CMS is scheduled to publish the prices. These prices will not go into effect until Jan. 1, 2026. In a laddered approach, 15 more drugs will be selected in 2024 for 2027 implementation, another 15 drugs covered either under Medicare Part D or Part B for 2028, and another 20 drugs for 2029 and later years.

The timing assumes no disruption from litigation, according to Howard Deutsch, a principal at ZS Associates, a management consulting and technology company. Merck, which is expected to have one of the 2023 drugs listed, filed a lawsuit in early June against the government, claiming First and Fifth Amendment violations, which was followed by lawsuits filed by the U.S. Chamber of Commerce and Bristol Myers Squibb. Although CMS published draft guidance in March on the negotiation process, Deutsch says he read all 90-plus pages of guidance and still was unclear on how pricing will work.

Deutsch says the CMS price negotiation isn’t really a negotiation. “For all practical purposes, the government will set a price, and it will allow the pharmaceutical company to accept that price or be ruined in penalties.” The target drugs for 2023 have not been explicitly announced, but “it’s not like people are waiting with bated breath,” Deutsch says, given the CMS parameter. Lists predicting which 10 drugs CMS will select the first year have been published, and they have included Eliquis (apixaban), Januvia (sitagliptin) and Jardiance (empagliflozin).

It is unknown how the CMS pricing will impact commercial payers, although the pricing will carry through to Medicare Advantage.

“We expect (commercial) payers will try to use that as leverage of sorts, but fundamentally, there’s no new market leverage they’d have that they didn’t have before,” says Deutsch. “There are no strong reasons to believe manufacturers will have to change their discounting behaviors.”

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