Prescription drug prices have long been a recurring issue between insurance companies and drug companies.
Those without insurance often pay high prices for urgently needed medicines.
The Biden administration pushed for a solution with the Inflation Lowering Act and gave Medicare the power to negotiate prescription drug prices directly with drug companies.
ABC News’ “Start Here” spoke with U.S. Health and Human Services Secretary Xavier Becerra about negotiations starting Thursday.
Start here: Secretary Becerra, thank you for being with us. How does this work?
U.S. Department of Health and Human Services (HHS) SEC. XAVIER BECERRA: Brad, you’re right. It’s incredible that for 65 million Americans, we can’t try to get the best price. It’s one of those things, take it or leave it. Drug companies set prices. You see, Americans today are paying two to three times more than they should be paying for those prescription drugs, while people around the world are paying far less for those prescription drugs. So now is the time. As you said, the Inflation Reduction Act gives us an opportunity now.
The president fought for this law, and now we’re going to start negotiating. We’ve submitted offers to nine companies with the first 10 drugs we’ve negotiated, and now we have the opportunity to negotiate back and forth.
Start here: What types of drugs are we talking about?
BECERRA: These drugs cover cancer, diabetes, [and] heart disease. [They are] You and I know that these types of chronic diseases affect many Americans and cost us dearly. These drugs, these 10 drugs alone are costing our federal government, [and] Taxpayers will lose $46 billion by 2022, while Medicare members who buy these drugs will lose about $3.5 billion out of pocket.
Start here: As you said, these are the 10 most commonly used drugs in the Medicare system. What was the timeline for when this actually happened? You start talking today. You said you submitted your offer today; so what happens?
BECERRA: So the company has about a month to make a counteroffer to us. And then we also engage with them and respond to what they say. But by August 1, we have to complete negotiations and have a price, a negotiated price. The price will be effective from January 2026.
Start here: You mentioned how expensive our medicines are compared to other countries; two and three times more. why is that? Is it just because the government can’t negotiate through Medicare that’s why?
BECERRA: Well, that’s what I thought. You go into a car dealership to buy a car. Do you pay the price you see on the sticker? correct? Of course, you don’t know.You go in and say, “Here’s the sticker price. I know you’re paying a lot less. Hey. I also read Consumer Reports. I know [it] It actually only costs you so much. I know the actual manufacturer gives you, the dealer, further discounts the more you sell, etc. So this is the price I give you. “And then of course they go into that back room and they come back and they give you a different price and you bargain back and forth until you get a price that you’re willing to accept. If you say, ‘I don’t like this price,’ I’m leaving.” You try to bargain. We can’t. We’re restricted by law. Now we can. That’s why we think we’re going to drive prices down.
Start here: By the way, in any real negotiation, like you just mentioned, you have to be willing to stand up and walk away, right? So, the same goes for drugs? I mean, is it possible that Medicare will no longer cover a drug because you can’t agree on a price?
BECERRA: Well, look, that’s the fun part. Until the Inflation Reduction Act is passed, we have no choice. We must accept the pricing these manufacturers charge for their drugs, or we will not be able to provide this drug to the millions of Americans on Medicare. So now we have the opportunity to try and negotiate to get the best price. By the way, pharmaceutical companies are not forced to negotiate. They have a choice.
If they want to sign up for Medicare, they can continue to sell drugs to anyone they want. But if they want to do that through Medicare, they have to negotiate with us now for these ten drugs.
Start here: No, I get it. But saying they’re like, that’s about it. Are you going to say, “Well, we’re not going to pay that.” Is it possible to stop covering drugs because you’re not getting the deal you want?
BECERRA: Well, we believe that by engaging in good faith up front, negotiations will result in a good price.
Start here: Who saves money in the end? Is this not an ordinary consumer? I don’t have health insurance. Uncle Sam won’t negotiate on my behalf. I think Medicare would pay the same amount, maybe out of pocket. They don’t see the sticker price difference. So who really saves money? Is it because the taxpayers are too big or something?
BECERRA: So people on Medicare will benefit directly from Medicare being able to negotiate the fairest prices for these drugs. The lower the price, the more money Medicare and many Medicare beneficiaries spend. When Medicare saves money, taxpayers also save money because taxpayers help pay for the Medicare program for Medicare beneficiaries.
So, ultimately, all Americans will benefit from lower drug costs under Medicare. But remember what happened with insulin, which was part of the Inflation Reduction Act effort. The insulin required for Medicare beneficiaries is now reduced to a maximum of $35 per month. Before January 1 of this year, the number was probably three to four times that number.
Now after the law goes into effect, it’s just $35 a month. But guess what? Insulin manufacturers have also now moved to lower the price of insulin for those without Medicare because the law does not yet apply to those people.
Start here: Oh, so it changes the ecosystem, it changes expectations?
Becerra: That’s right, that’s right.
Start here: When would you see this happen? When will average Americans actually see the difference? If you think.
BECERRA: Well, they’re starting to see a difference now with insulin. Although the prices for these drugs that we are negotiating now will not actually take effect until early 2026, everyone will see what happens by August of this year. So we’ll see what happens, but negotiating competition is as American as apple pie. Who could object to you trying to get the best price for the vehicle you want to buy from a dealer?
Start here: Who could argue with this? Maybe a pharmaceutical company, right? They say this will harm their competitiveness. They say this could harm their medical breakthroughs. They sued the Biden administration, calling it unconstitutional. Republicans and Republicans say this is not the way America should do business. What’s your response to that?
Becerra: You know, I was the attorney general of California. I would say the fact that I’m being sued probably means I’m doing the right thing.
Start here: So you don’t think this is unconstitutional?
Becerra: Oh, not at all. No, no, no, we see the federal government has started negotiating. The Veterans Administration has negotiated drug prices. The Indian Health Service, part of the Department of Health and Human Services, which provides direct care and purchases drugs, goes through the same price negotiation process. This is not new.
Start here: You don’t think this hurts innovation and competitiveness and the ability to create the next big new cancer drug that could impact millions of lives, it doesn’t actually prevent companies from doing that.
BECERRA: Think of it this way: If we negotiate now to get the best price, there are going to be some companies that know they’re going to be able to compete with some of the brand name pharmaceutical companies that are going to be able to squeeze everybody out of the market in some way. The more competition there is, the more innovation there will be. The more innovation there is, the better the price for everyone.