Biden’s Plan for Medicare Drug Price Negotiation: Quick Facts and FAQs

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It’s no secret today that millions of Americans are on the brink of poverty. With years of inflation and reduced purchasing power, basic needs like rent, groceries and healthcare have become almost unaffordable.

To combat this, the Biden Administration has recently introduced the Inflation Reduction Act. This paves the way for cheaper and more accessible medication, among other benefits.

Here’s everything you need to know about this program.

What Is The Negotiation All About?

Rooted in the Inflation Reduction Act, the drug price negotiation program is a concerted attempt to reduce the cost of the most expensive and frequently used medicines. It is for the very first time that the authorities have been authorized to directly negotiate prices with pharmaceutical companies.

The initial batch of negotiations will focus on ten drugs that are prescribed for chronic illnesses like diabetes, kidney disease, arthritis, heart failure and Crohn’s disease.

In 2022, these ten drugs cost the government over $50 billion. The out-of-pocket expenditure to medicare recipients amounted to $3.4 billion. Eliquis is one of the most expensive drugs to date, costing the government nearly $16.5 billion annually. Further, these drugs have been in the market for a long time now and still do not have any generic competition.

Although the pricing discussions will be complete by August 2024, the new prices for Medicare beneficiaries will be announced in 2026. The Center for Medicare & Medicaid Services (CMS) will add several other medications for price negotiations in the coming years.

Who Will Benefit?

Recent reports show that millions of Americans find it difficult to pay for their healthcare. Roughly 30% of American adults admit they have skipped prescribed medicines. The most obvious reason is that the cost of medicines is very high. More than 80% believe that the prices are “unreasonable.”

In this context, the new drug price negotiations are poised to significantly reduce costs and improve accessibility and health outcomes for over 9 million Americans.

The main medicare recipients—senior citizens and disabled Americans—would benefit from lower deductibles and cheaper drugs. This is especially a boon for lower-income families and people with chronic illnesses who rely on medicare support.

Reduced costs will also help the government reduce expenditure by tens of billions of dollars. Benefits will compound gradually as more medications are included. Taxpayers can also rest easy knowing that their money will be put to better use.

A $2000 cap was imposed on out-of-pocket expenses and allowed insulin cost sharing for medicare beneficiaries up to $35 per month. And that’s not all!

CMS also recognizes that nutritional wellness is critical for good health. The unique medicare grocery allowance 2023 offers much-needed financial relief for grocery expenses for senior citizens.

What Do Pharmaceutical Companies Say?

CMS has promised to make a fair initial offer, relying on company-submitted data like research costs.

It is up to the pharmaceutical companies to choose to sign up for the negotiation program. However, opting out of negotiations means either paying a heavy excise tax for a defined period or completely withdrawing from medicare programs.

The selected drugs have been in production for several years. Some are even close to patent expirations. Thus, they are not significant money-makers for the pharmaceutical companies.

Despite the government extending a hand of cooperation, the pharmaceutical industry has strongly protested the proposed negotiation program. Several companies, including Johnson & Johnson and Merck, have even raised legal challenges to block the price negotiations and protect their profits.

People are already struggling to pay their insurance premiums. “If we lost drug price negotiation … premiums would then have to rise to compensate for this improvement in benefits,” warned Stacie Dusetzina, Professor of Health Policy and Cancer Research, Vanderbilt University School of Medicine.

If this challenge succeeds in courts, it would mean a major loss for low-income seniors all over the country.


The USA has one of the most expensive healthcare in the world, but the country is still behind on measures of quality, equity and access to care.

The medicare drug price negotiation program is just one step towards a better healthcare system for all.

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