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Drugmakers face down deadline on Medicare price negotiations

The deadline for drugmakers to sign agreements to negotiate with Medicare on pricing is fast approaching. Major drugmakers have until Sunday to sign an agreement to participate in the program or potentially face heavy taxes and lose their ability to sell through Medicare.

With courts yet to impose an injunction in a spate of pending lawsuits, several of the companies producing the 10 drugs selected for Medicare negotiations appear ready to move ahead with negotiations.

Merck, whose diabetes treatment Januvia was selected, made it known it will sign an agreement with the Centers for Medicare & Medicaid Services (CMS) “under protest.”

“While we disagree on both legal and policy grounds with the IRA’s new program, withdrawing all of the company’s products from Medicare and Medicaid would have devastating consequences for the millions of Americans who rely on our innovative medicines, and it is not tenable for any manufacturer to abandon nearly half of the U.S. prescription drug market,” Merck said in a statement.

A spokesperson for Bristol Myers Squibb (BMS), which has a hand in two products on the Medicare list, similarly said it had “no choice other than to sign the ‘agreement.’”

“If we did not sign, we’d be required to pay impossibly high penalties unless we withdraw all of our medicines from Medicare and Medicaid. That is not a real choice,” the company’s spokesperson told The Hill in a statement.

BMS and Merck have filed lawsuits against the Department of Health and Human Services (HHS) to block the bargaining program, accusing the federal government of unconstitutional actions and exceeding its authority. 

Under the rules established by the Inflation Reduction Act, manufacturers that don’t want to take part in negotiations can withdraw all of their products from coverage under Medicare and Medicaid, losing a highly lucrative income source.

The alternative is an excise tax on a selected product’s sales in the U.S., with the rate starting at 65 percent and potentially going all the way up to 95 percent. Plaintiffs suing to stop the negotiations have said no company could afford to pay the tax. Drugmakers can avoid the penalty by giving at least 30 days of notice before it goes into effect, saying they will terminate their relationships with Medicare and Medicaid.

During recent oral arguments between the Chamber of Commerce and the federal government, attorneys representing the administration argued there is nothing compelling companies to keep their drugs covered under Medicare and Medicaid. They further argued the risk of financial harm as a result of ending relationships with the CMS, which they acknowledged could occur, does not amount to a coercive action.

“There are decades of settled precedents from across the country that collectively established that Medicare providers have no vested interest in future Medicare participation at all, let alone under particular terms, because Medicare is a voluntary program,” the government argued.

Sunday has dual importance as the Chamber of Commerce in its lawsuit has requested a preliminary injunction on the Medicare Drug Price Negotiation Program, saying “irreparable harm” would occur if the process is allowed to continue.

U.S. District Judge Michael J. Newman has said he is working as quickly as he can to provide a decision on the matter. At the time of writing, no ruling has been issued. 

Other drugmakers whose products have been chosen gave more conciliatory statements when speaking on their intent to engage with the CMS.

AstraZeneca said it was “proud” of the role its drug Farxiga has played in the lives of people in the U.S. living with Type 2 diabetes. 

“We remain committed to ensuring patients have access to FARXIGA and plan to participate in the process outlined by CMS to communicate the value of FARXIGA to people covered by Medicare,” the company said.

Boehringer Ingelheim’s diabetes medication Jardiance was also chosen. The company said in a statement it was “committed to engaging in open and transparent conversations with CMS.” 

“We look forward to sharing detailed information with CMS on the value of Jardiance and to reinforce the need to invest in scientific medical innovation for the patients we serve,” it added. 

Some companies were less definitive when asked about their intentions. 

Novo Nordisk, the maker of NovoLog, said it “supports policies to ensure patients can afford their medicines, including insulin. Unfortunately, we have seen CMS take aggressive steps to carry out unilateral price setting without consideration for the impact on patients living with chronic disease or the overall healthcare system.”

“We continue to explore all options that allow us to drive change for people that need it and strive to continue to bring innovative medicines to the market while helping increase access for those that need them,” Novo Nordisk added.

Other companies whose products have been named — including Johnson & Johnson, Novartis, Immunex Corporation and Pharmacyclics — did not immediately respond when reached for comment by The Hill.

Regardless of the vocal resistance to negotiating, experts have said drug manufacturers were always likely to take part in the process because of the ever-present possibility that their lawsuits could fail.

Jack Hoadley, research professor emeritus in the Health Policy Institute of Georgetown University’s McCourt School of Public Policy, said he is not surprised companies are moving forward with government talks despite their public objection.

“I think the companies probably have a dual strategy of trying to stop the program through the courts while also starting the process in case they lose in court,” said Hoadley. “The penalties for not participating are substantial so they create a very strong incentive to participate.”

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