The Trump administration recently made headlines by releasing the prices that Medicare will pay for 15 top-selling prescription drugs. These negotiations, led by the Centers for Medicare and Medicaid Services, resulted in a significant 44% reduction in net prices compared to what health plans were paying in 2024. This marks a substantial improvement from the 22% reduction achieved during the first round of negotiations.
The 15 selected drugs accounted for a total of $42.5 billion in Part D gross prescription drug spending last year, with Medicare beneficiaries spending $1.7 billion out of pocket on these medications. The negotiated price reductions are projected to save beneficiaries an estimated $685 million in out-of-pocket costs.
These maximum fair prices are the result of a drug pricing provision enacted in 2022 under the Inflation Reduction Act. To be eligible for price negotiation, small molecule drugs must be at least seven years post-launch without generic competition, while large molecule biologics must be 11 years post-launch without biosimilar competition. The selected pharmaceuticals come from the top 50 drugs with the highest Medicare Part D expenditures, and starting in 2026, from the top 50 drugs with the highest Medicare Part B spending.
The negotiation process involves an offer-and-counteroffer process between the federal government and pharmaceutical manufacturers. The IRA law establishes a ceiling price for each selected drug, based on a percentage of the non-federal average manufacturer price. This ensures that prices do not exceed a certain level during negotiations, leading to substantially lower maximum fair prices for drugs without high rebates negotiated by Part D plans.
Unlike most-favored nation pricing deals, which rely on executive orders and voluntary agreements, Medicare drug price negotiations are a permanent feature codified in law. While slight nuances in guidance may change from administration to administration, the law remains in place unless repealed.
The processes for determining maximum fair and most-favored nation prices are different, with most-favored nation prices superseding maximum fair prices in cases of conflict. Using Novo Nordisk’s Ozempic and Wegovy as examples, we see the complex array of prices that exist depending on the buyer and purchasing channel. Despite list prices of $950 and $1,350 per monthly prescription, most individuals pay a much lower co-payment out-of-pocket after meeting deductibles, typically ranging from $25 to $150 depending on their insurer.
Health Plan Prices for Ozempic and Wegovy
According to a recent study, the net prices paid by health plans, after rebates, for Ozempic and Wegovy are estimated to be at least 58% off of the list price. This means that health plans are paying around $399 for Ozempic and $567 for Wegovy.
Direct-to-Consumer Prices
For those who are not insured for these products, direct-to-consumer prices on Novo Nordiskās platform have now decreased to less than $350 for each medication. This is a significant reduction in cost for individuals who need these medications but do not have insurance coverage.
Maximum Fair and Most-Favored Nation Prices
When considering the maximum fair and most-favored nation prices, the situation becomes more complex. The Medicare-negotiated maximum fair price for low dose Wegovy is $274 per month, while a higher dose formulation is $385. Ozempicās price is also $274. However, the most-favored nation price for both medications is $245, superseding the maximum fair price and applicable to both Medicare and Medicaid health insurers. Additionally, on the TrumpRx direct-to-consumer online platform, individual patients can purchase the drugs for $345 a month.
Impact on Medicare Beneficiaries
One of the main provisions of the IRA that is substantially lowering out-of-pocket costs for certain Medicare beneficiaries is the cap on annual expenses. In 2024, the cap is set at $3,300, and it will lower to $2,000 in 2025. This provision is especially beneficial for beneficiaries taking high-cost specialty medications, such as those used in cancer treatment. By capping annual out-of-pocket expenses, recipients are saving thousands and sometimes tens of thousands on prescription drug costs.
