What happens next after the announcement of Medicare prescription drug price cuts?

How much money will older people ultimately save at the pharmacy if Medicare lowers the prices of ten of the most expensive drugs, including diabetes, heart and arthritis medications? And when will they benefit from the savings?

This is a major milestone in the Biden administration's efforts to reduce the skyrocketing cost of prescription drugs in the United States. But there is still much work to be done, including the burning question: Will older people even benefit from the savings if drug companies succeed in blocking negotiations in court?

“Lower prescription drug prices are extremely popular with the public, but the future is uncertain,” said Lawrence Gostin, director of the O'Neill Institute for National and Global Health Law at Georgetown University. “The pharmaceutical industry and its allies have launched an avalanche of lawsuits challenging price negotiations.”

So far, the courts have immediately dismissed the lawsuits.

Who benefits from lower prices?

More than 65 million people in the United States are covered by Medicare, and most people won't see direct savings until 2026, when the prices take effect.

The Biden administration said Thursday it had negotiated price reductions of between 38 and 79 percent for each of the 10 drugs that cost the program the most.

These include Eliquis, a popular blood thinner from Bristol Myers Squibb, whose list price for a 30-day supply in 2023 was $521, Enbrel, a rheumatoid arthritis drug from Amgen, whose list price in 2023 was $7,106, and NovoLog, a diabetes drug from Novo Nordisk, which costs $495.

More than 8 million Medicare beneficiaries take one or more of the negotiated drugs, said Tricia Neuman, senior vice president of KFF, a nonprofit that researches health policy issues.

It's difficult to estimate how much the federal government will save insured people and American taxpayers. Biden administration officials declined to disclose the net price – the amount Medicare typically pays for prescription drugs after all discounts and reimbursements are deducted. (The net prices negotiated between insurers and drugmakers often include confidentiality agreements.)

Still, the government expects the negotiated prices to save older people $1.5 billion in out-of-pocket costs and $6 billion for the Medicare program, a 22 percent reduction in overall net spending, says Stacie Dusetzina, a professor of health policy at Vanderbilt University in Nashville, Tennessee.

Implementing the new pricing for Medicare Part D plans will take some time because of the cost implications for patients, the government and plans.

“They are doing a complete overhaul of these various performance components,” Dusetzina said.

How much can Medicare beneficiaries save?

When the prices take effect, the seniors who are likely to see the most savings will be those whose Medicare Part D plan requires them to pay a percentage of the drug's total cost before discounts, also known as a copayment, Neuman said. This is different from a copayment, which is a fixed amount — say, $10 — for a drug, regardless of its total cost.

“People who take these drugs can expect savings, but the amount of savings will vary from plan to plan and will depend on whether they are in a plan that requires a copayment or a deductible,” Neuman said.

While most Medicare beneficiaries “wouldn't save a huge amount,” especially if they take one of the 10 selected drugs, Gostin said, the lower prices could lead to lower premiums for everyone.

“For me, the most important benefits of drug price negotiations are that lower drug costs impact everyone and benefit everyone with lower prices,” he said.

And what about the $2,000 limit for prescription drugs?

Currently, the savings only apply to those taking one of the ten drugs, but that is likely to change.

Under the provisions of the Inflation Reduction Act (IRA), the federal government can negotiate lower prices for several additional drugs each year.

Tariffs will be agreed for 15 more drugs in 2027, another 15 drugs will follow in 2028 and 20 more in each subsequent year. Seniors will probably be able to save significantly more in the next few years.

By February, the government is expected to announce the next 15 drugs under negotiation.

Still, people may not have to wait until 2026 or 2027 for relief. Starting next year, there will be a $2,000 annual cap on the deductible for prescription drugs included in the IRA.

“This is the next big change coming,” Dusetzina said. “It's important to recognize that the 2025 benefit change will have already improved the situation for seniors, so by the time negotiated prices take effect, the cost may not change for people who use the drugs more frequently, but it will help everyone who uses Medicare Part D.”

Many people don't even reach the $2,000 out-of-pocket limit, Neuman says, but that's OK.

“Just the thought of not having to pay more than $2,000 is a huge relief because you never know when you're going to be prescribed a really expensive drug,” she said.

Affordable medicines are at risk

There is a risk that all of this will be turned on its head if the pharmaceutical companies are successful in their lawsuits against the Medicare bargaining program, Gostin said.

That's because the savings from the Medicare Negotiation Program are intended to cover much of the $2,000 cap on out-of-pocket costs. Currently, the cap is intended to be covered by other provisions of the IRA – such as a rebate for drug manufacturers that raise the prices of their drugs faster than inflation – and by greater cost sharing by Medicare and drug manufacturers.

According to Georgetown University's Health Care Litigation Tracker, more than a dozen lawsuits have been filed to overturn the law. A few have already been dismissed by the courts, but several are still pending.

“Ultimately, these cases will go before the Supreme Court, which is hostile to health and safety regulations,” Gostin said.

Another factor to consider is the possibility that former President Donald Trump wins the upcoming presidential election, Neuman said.

Trump's position on the IRA and Medicare negotiating provisions remains unclear, Neuman said.

However, she pointed out that one of the goals of Project 2025 is to repeal the law.

Project 2025 is a comprehensive collection of right-wing ideas for reshaping the U.S. government. Although it was written by former Trump aides in anticipation of a second term, Trump has said he knew “nothing” about it.

“If President Trump wins the election, he could end the price negotiation program,” Gostin said. “All in all, the future of affordable medicines for all Americans is at stake.”