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Inflation, the cost of living, and medical expenses/insurance are hot-button issues in the US. As we move into the 2024 election cycle, they will likely occupy more time and attention in the media and campaign trail. One of the principal challenges facing consumers in the new year is a pending increase in drug prices, which are set to be instituted by manufacturers including Merck, Johnston & Johnson, Bristol Myers Squibb, and Pfizer. However, the current administration is aiming to reduce costs to some consumers via direct negotiations under Medicare via the Inflation Reduction Act of 2022.
2024 Drug Price Increases
A new year generally increases pharmaceutical costs as manufacturers announce their most current drug prices. Reuters first presented details on the then-pending increases in December 2023 when they presented a report from health research firm Three Axis Advisors. This research indicated that drug price increases were planned for around 500 individual drugs and formulations, meaning consumer price increases on more than 140 different brands of medicines. While price increases are generally about 10% or lower, the potential effect on vulnerable consumers and healthcare organizations is still a concern.
Concerns around drug pricing stem not only from industry financial decisions but also from global events. The ongoing, interlocking crises in the Middle East have raised serious questions about how supply chain issues might develop throughout 2024. Worries about a potential recession and a conflict centered on China and Taiwan bring additional concerns to an already troubled sector.
Medicare, Negotiations, and Lawsuits
The Biden administration has made drug pricing a visible priority, leveraging new powers enabled by 2022’s Inflation Reduction Act to begin efforts to negotiate lower prices for Medicare recipients. Such negotiations had previously been prohibited under a 2003 law. Negotiations have focused on ten drugs considered especially critical for those receiving Medicare benefits: The drugs selected for the initial round of the negotiation program are Bristol Myers Squibb Co.’s blood thinner Eliquis, Boehringer Ingelheim and Eli Lilly & Co.’s heart-failure drug Jardiance, Johnson & Johnson’s blood thinner Xarelto, Merck & Co.’s diabetes drug Januvia, AstraZeneca’s AZN, heart-failure drug Farxiga, Novartis AG’s heart-failure drug Entresto, Amgen Inc.’s rheumatoid-arthritis drug Enbrel, AbbVie Inc. and Johnson & Johnson’s blood-cancer drug Imbruvica, Johnson & Johnson’s psoriasis treatment Stelara and Novo Nordisk’s NVO, insulin Fiasp.
Here is how things stand: By February 1, the federal government will submit a set of offers for each of these ten drugs to begin the first round of negotiations. If successful, the negotiated prices will take effect in 2027. Negotiated pricing will align pharmaceutical companies with other healthcare providers and vendors doing business with Medicare.
However, several pharmaceutical companies are fighting back by filing lawsuits seeking exemptions from the negotiation process. At the time of this writing, nine companies and industry organizations have filed lawsuits objecting to the negotiations on constitutional grounds. The courts may reach decisions in at least some cases by March 1, 2024.
What Does This Mean?
Drug companies and consumers are both in “wait and see” mode. These court decisions may have ripple effects on other industries and entities doing business with the government. Likewise, this takes place in an election year during which the presidential race is likely contentious. Add geopolitical uncertainties, and it is difficult to predict the future of these negotiations or drug pricing in general.