Medicare cuts drug prices by 79%: What Biden's plan means for you

Medicaid has cut the prices of some of the top 10 best-selling prescription drugs by as much as 79%, a move expected to save taxpayers billions.

President Joe Biden and Vice President Kamala Harris celebrated their administration’s victory.

“Big pharmaceutical companies have often inflated the prices of life-saving drugs, often charging many times the cost of manufacturing them just to increase their profits. Millions of Americans have suffered as a result,” Harris said.

The price cuts will affect diabetes drugs, blood thinners and blood cancer drugs. These cuts range from 38% to 79% and will take effect in 2026. While the project is expected to save taxpayers $6 billion and some of the 67 million Medicare beneficiaries $1.5 billion, the exact financial relief for individuals remains uncertain. The final price consumers pay at the pharmacy will depend on several factors, including their specific Medicare plan, rebates and copayment rates.

The Inflation Reduction Act, which took effect in 2022, was critical to giving Medicare the ability to negotiate prices on some of the most expensive drugs. This bill narrowly passed in Congress, with Harris, as President of the Senate, having the tie-breaking vote to pass the bill. No Republicans voted for the bill.

“We have finally defeated the pharmaceutical industry, and I might add, without the help of Republicans. Not a single Republican voted for this bill, period, not a single one in the entire Congress,” Biden said.

However, Republicans criticized the measure and called it “price fixing.”

“Their prescription drug price-fixing system has done only two things: It has driven up health care costs and stifled American medical innovation,” said House Speaker Mike Johnson.

In Texas, Governor Greg Abbott also sharply criticized the measure.

“Government price fixing is a proven failure,” he wrote on X/Twitter. “The solution is to stop the trillions of dollars of government spending that drives up the prices of everything from gas to groceries to housing.”

Critics argue that cutting prices for some drugs could hurt drug companies' revenues and discourage them from researching new drugs. However, Reuters reported that drug companies said last month they did not expect the price cut to have a significant impact on their business.

“To me, this suggests that companies can continue to make profits if they have incentives to innovate,” Stacie Dusetzina, a professor at Vanderbilt University, told Reuters.

Still, pharmaceutical companies have said lowering drug prices would not solve the “biggest problem of affordability for patients” because health insurers and pharmacy benefit managers still play a key role in driving up prices.

The full list of affected drugs can be found at Reuters.