Initial Reactions to CMS' Release of the Maximum Fair Prices for the First 10 Negotiated Part D Drugs

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20 Aug 2024

CMS was due to release information on the Medicare Part D discounts negotiated around Sept. 1, and the announcement came early. In this seventh installment of our ongoing series on the key provisions of the Inflation Reduction Act of 2022 (IRA), we review the Maximum Fair Price (MFP) and associated discounts for the initial 10 drugs CMS released on August 15th and provide initial reactions to the list.

As shown on Table 1 below, the discounts for the initial 10 drugs range from 38% on Imbruvica to 79% on Januvia, and CMS’ announcement listed the drugs in order from the largest to smallest discount.

Table 1: Projected Savings for People with Medicare Part D Coverage (Source: CMS.gov)

Table showing the details of initial 10 drugs released by CMS

Initial Observations:

Initial observations show consistent discounts for products that treat commonly treated diseases. However, if grouped by condition treated, we begin to see a close range of discounts, as shown in Table 2 below:

Table 2: Negotiated products and their associated discount by condition

Table showing the products and their associated discount by condition

For instance, the two drugs primarily treating diabetes (Januvia and Fiasp/Novolog) had the largest discounts of 79% and 76% respectively. While drugs such as Farxiga and Jardiance which also treat diabetes as well as other conditions like heart failure had lower discounts of 68% and 66%, they are still in proximity to diabetes. But Entresto, which only treats heart failure, had a lower discount of 53%. The blood clot sub-class with the largest discount delta between the two products is Xarelto (62%) and Eliquis (56. It is not surprising that Imbruvica has the lowest discount in the initial group of 10 products as it treats blood cancers and is likely not discounting to commercial customers at the same level as the other hyper-competitive classes being negotiated by CMS.

Other Observations:

The discounts CMS listed are compared to the CY 2022 list price, which represent Wholesale Acquisition Costs (WACs) for the selected drugs during the 2022 Contract Year. The list prices on all these products have increased since CY 2022 and the discounts compared to today’s WACs will be greater and will be examined further in future blog posts.

This analysis shows that drug manufacturers' pricing remains under intense scrutiny. Indegene is planning to run additional analyses on these initial 10 drugs and show the current level of discounts by comparing them to the current list prices, comparisons to other price benchmarks, as well as estimates of the future drugs under negotiation. Please continue to follow our upcoming blog posts as we continue our assessment of the impact of the IRA.

The timing of this announcement should also be considered in the context of the US election cycle. The promised savings are likely to become a “talking point.” This is true even though the prices do not come into effect until January 1, 2026. In addition, the recent announcement by the Biden administration to spend $5B to blunt the spike in Medicare drug premiums only adds fuel to the firestorm surrounding the IRA and drug pricing,

Meanwhile, you can read the previous editions of our IRA blog series here:

Part 1 of the series was an overview of the IRA’s key provisions.

Part 2 assessed price increase levels pre/post-2020 election through the end of 2022.

Part 3 illustrated the impact that both the IRA and the period of post-pandemic higher inflation had on January 2023 price changes. It also talked about the top 50 products accelerating price increases, and how many products stopped short of triggering the inflation penalty.

Part 4 illustrated the impact of the IRA inflation penalty rebate on Part B drugs.

Part 5 examined 2023 mid-year price changes in the context of the IRA regulations and provided observations about the 10 initial products selected for “negotiation.”

Part 6 discussed the influence of IRA, Inflation Easing and Medicaid Regulations on the US drug price landscape

References

1. Inflation Reduction Act of 2022 – Impact on US Pharma and Drug Pricing

2. Pre-Implementation Impact of IRA Inflation Penalties: Balancing Opportunities and Concerns for Drug Manufacturers

3. Analyzing Drug Manufacturers' January 2023 Price Adjustments: Assessing the Influence of IRA, Inflation, or Both

4. Inflation Reduction Act: Impact of inflation penalty rebate on Part B drugs

5. The Drug Negotiation Dilemma: Exploring the First 10 Products and other IRA updates

6. IRA, Inflation Easing and Medicaid Regulations - Influence on the US Price Change Landscape

7. U.S. Bureau of Labor Statistics

8. Medi-Span Price Rx: Online drug pricing tool

9. Here's the latest update on IRA: Who “Won” the Initial Price Negotiations?

10. focuses on Trump’s Executive Order Expanding IRA Pill Penalty to International Reference Pricing