(NEW YORK) — Prescription drug prices have long been a back-and-forth issue between insurers and pharmaceutical companies.
Those who aren’t covered by insurance are usually left with a high bill for much-needed medicines.
The Biden administration has pushed a solution through the Inflation Reduction Act and gave Medicare the power to negotiate prescription drug prices directly with drug companies.
ABC News’ “Start Here” spoke with United States Secretary of Health and Human Services Xavier Becerra about the negotiations, which started Thursday.
START HERE: Secretary Becerra, thanks for being with us. How is this about to work?
HHS SEC. XAVIER BECERRA: Brad, you hit it right on the money. It’s incredible to believe that for 65 million Americans, we could not try to get the best price. It’s one of those, take it or leave it. The drug company sets the price. And lo and behold, Americans today pay two or three times more than they probably should for those prescription drugs that folks around the world are paying so much less for. So it is now time. And the Inflation Reduction Act, as you said, now gives us a chance.
The president fought for that law and now we’re going to start negotiations. We have submitted our offer to the nine companies that have the 10 drugs that are the first to be negotiated, and we’ll have an out now have a chance to have a back and forth and negotiations.
START HERE: What types of drugs are we talking about?
BECERRA: These are drugs that cover cancer, diabetes, [and] heart disease. [They are] the types of chronic conditions that you and I know that affect so many Americans and cost us so much. These drugs, these 10 drugs alone cost us, the federal government, [and] taxpayers $46 billion in 2022, and they cost folks on Medicare, who are the ones that are getting the drugs, about $3.5 billion out of their own pocket.
START HERE: And these are, like you said, like the 10 most-used drugs in the Medicare system. What is the timeline for how this actually plays out? You guys start talking today. You said you submit your offers today; then what happens?
BECERRA: So the companies have about a month to give us a counteroffer. We then engage them as well and respond to what they’ve said. But by August 1, we have to finish the negotiations and have a price, a negotiated price. That price will then take effect the beginning of January 2026.
START HERE: You mentioned how expensive our drugs are compared to other countries; two and three times higher. Why is that? Is it just because the government can’t negotiate via Medicare, that’s the reason?
BECERRA: Well, I think of it this way. You go into a car dealership to buy a car. Do you pay the price you see on the sticker? Right? Of course, you don’t. You go in there saying, “That sticker price. I know you paid a lot less. Hey. And I also read Consumer Reports. I know that [it] really only costs you this much. And I know that the actual manufacturer gave you, the dealer, a further discount the more you sell, etc., etc. So this is the price I’ll offer you.” Then of course they go into that back room and they come back, and then they offer you a different price and you haggle back and forth until you get a price that you’re willing to live with. And if you say, “I don’t like the price, I’m going to go to the dealer down, down the street.” You try to get the best bargain you can. We could not do that. By law, we were restricted. Now we can do it. That’s why we think we’re going to drive the prices down.
START HERE: By the way, in any real negotiation, like the one you just mentioned, you have to be willing to get up and walk away, right? Is that, is that the case with drugs, though? I mean, is there a chance that there’s going to be a drug no longer covered by Medicare because you guys couldn’t agree on a price?
BECERRA: Well, see, that’s the interesting part. Up until the passage of the Inflation Reduction Act, we didn’t have a choice. We had to accept the price that those manufacturers put on the drug, or we wouldn’t have access to it for the millions of Americans who get Medicare. And so now we have a chance to try to negotiate, to get the best price. And by the way, the drug companies aren’t forced to negotiate. They have a choice.
If they want to participate in the Medicare program, they get to continue to sell the drug to anyone they’d like. But if they want to do it through the Medicare program, they have to engage in negotiations with us now on these ten drugs.
START HERE: No, I get it. But say they’re like, it’s this much. And you guys are like, “Well, we’re not paying that.” Is there a chance drugs stop getting covered because you guys didn’t get the deal you wanted?
BECERRA: Well, we believe that by engaging in good faith upfront, negotiations will settle on a good price.
START HERE: Who saves money at the end of all this? This is not the average consumer, right? I’m not on Medicare. Uncle Sam’s not going to negotiate on my behalf. I assume Medicare folks would pay the same amount, maybe out of pocket. They don’t see a sticker price difference. So who actually saves money? Is it taxpayers writ large or something?
BECERRA: So, directly, folks who are on Medicare will benefit by Medicare being able to negotiate for the best fair price, on these drugs. The lower the price is, the more that the Medicare program and many Medicare beneficiaries spend. When the Medicare program saves money, taxpayers save money because taxpayers help cover the cost of the Medicare program for Medicare beneficiaries.
And so at the end of the day, all Americans will benefit by having lower cost on drugs under Medicare. But remember what happened with insulin, which was part of the Inflation Reduction Act, efforts. It has now been lowered to $35 at most per month for the insulin that a Medicare beneficiary needs. It could have been three or four times that amount before Jan. 1 of this year.
Now that the law has kicked in, it’s only $35 a month. But guess what? The manufacturers of insulin have also now moved to reduce the price of insulin for people who aren’t on Medicare, for whom the law didn’t reach.
START HERE: Oh so it changes the ecosystem kind of changes the expectation?
BECERRA: That’s right, that’s right.
START HERE: When do you see that happening? When would the average American actually see a difference? If you think.
BECERRA: Well, they’re already beginning to see the difference right now on insulin. While the price on these drugs that we’re negotiating now won’t actually take effect until the beginning of 2026, everyone will see what happens as of August of this year. And so we’ll see what goes on, but negotiation competition that’s as American as apple pie. And who would be against you trying to negotiate for the best price for your vehicle that you’re going to buy from that dealer?
START HERE: Who would argue with that? Maybe the pharma companies, right? They have said that this will hurt their chances to be competitive. They said it could hurt them having medical breakthroughs. They’ve sued the Biden administration to say that this is unconstitutional. You’ve got GOP, you got Republicans saying that this should not be the way the U.S. does business. What’s your response to that?
BECERRA: You know, I used to be the attorney general of California. I’d say that the fact that I’m being sued probably means I’m doing something right.
START HERE: So you don’t think it’s unconstitutional, though?
BECERRA: Oh, not at all. No, no, no, We see negotiations occurring in the federal government already. The Veterans Administration negotiates drug prices already. Indian Health Services, which is under the Department of Health and Human Services and provides direct care and also purchases drugs, goes through the same process of negotiating for prices. This is not new.
START HERE: And you don’t think that hurts the ability to innovate and be competitive and create the next new huge cancer drug that could affect millions of lives, that this doesn’t actually hinder companies from doing that.
BECERRA: Think of it this way: If we’re now negotiating to get the best price, there will be companies who know they’ll be able to compete with some of the brand-name pharma companies who are able to somehow muscle everyone out of the market. The more competition, the more innovation. The more innovation, the better the price for everyone.
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