Pharma companies will ask the Trump administration to pause the next round of Medicare drug price negotiations

The news: Eli Lilly and other pharma companies will ask the incoming administration to delay the next round of Medicare drug price negotiations, according to a Bloomberg report.

Zooming out: As part of the Inflation Reduction Act (IRA), the Biden administration negotiated directly with pharma manufacturers to lower the prices of 10 prescription drugs for Medicare members. The negotiated prices range from 38% to 79% lower than list prices, according to the Centers for Medicare and Medicaid Services (CMS).

The CMS has until Feb. 1 to release the next batch of drugs (15) subject to price negotiations, but the agency is expected to do so before the Biden administration leaves office next week. Experts predict that based on Medicare drug spending data, Novo Nordisk’s Ozempic and Wegovy GLP-1 medications will be among the drugs selected for price talks.

Pharma’s big concern: Drugmakers have previously attested that having the government negotiate prices stifles innovation since lower profits from their existing drugs will limit their R&D investments for future treatments. The drug industry—unsuccessfully, so far—has also filed several lawsuits arguing that price negotiations are unconstitutional.

Our take: It’s hard for us to empathize with drugmakers. Their medications are protected from negotiations for several years after securing FDA approval, giving them plenty of time to rake in profits from high list prices. (We'll note that Lilly is approaching a market cap of $1 trillion while Novo's is ~$300 billion.) Plus, there are no restrictions on how much commercial health plans and employers pay for these drugs since the program only applies to Medicare.

Nevertheless, the pharmaceutical industry will pull every lever possible to get the Trump administration and Congress to either overturn the program or amend the process in their favor. We should find out soon if their efforts were successful.

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