Health Secretary Xavier Becerra breaks off Medicare drug pricing talks

When Congress passed the Inflation Control Act in 2022, there was a key provision that the Biden administration fought hard for. For years, private insurance companies negotiated with drug manufacturers over prescription drug prices.

However, Medicare, which represents 50 million seniors, did not have the same right to negotiate prices for its Part D insurance. This meant that Medicare basically had to accept the prices offered to it.

Health Secretary Xavier Becerra appeared on ABC News' flagship daily news podcast, “Start Here,” earlier this year to announce the start of negotiations. They had selected 10 drugs to prioritize and tried to negotiate prices down.

On Thursday, President Biden and Vice President Harris, at their first public event since Biden dropped out of the presidential race, said they agreed on all issues, a significant development for all Medicare recipients and for everyone who pays taxes to fund Medicare costs.

Secretary Becerra joined Start Here on Friday to discuss this further.

START HERE: Minister, when we last spoke, you just mentioned the drugs… including some diabetes drugs, some arthritis drugs, blood clot drugs, blood cancer drugs. Where are we now?

BECERRA: We're done negotiating, Brad. We've got ten drugs done. Every company has been involved in the negotiations. We've had offers, counteroffers, and we've reached a compromise on all ten. And that compromise is going to save Americans who are on Medicare and need these drugs a lot of money. And it's going to save the taxpayers who fund the Medicare program a lot of money, billions.

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START HERE: Yes. How much discount are we talking about here?

BECERRA: In some cases, the discount is as high as 79% from list price. I think the lowest discount is about 38%. And I want to qualify that a little bit. Very rarely does anyone pay list price for anything. And if they do, bring it back and haggle a little bit. If you go to the car dealer and look for list price, don't pay that. If you go to the department store, try to find anything you can find on sale, or you know will be on sale at some point.

And so everyone tries to get the best price for the product they have. In this case, it's a very important product, a prescription drug. But you should still be able to get a good price, and that's what we did. We negotiated and got a much better price than Medicare.

START HERE: But just so we can get this caveat clear. You say it's 68%, let's say it's about 79% off the list price. But you weren't paying the list price before. Can you tell us how much you were paying for these drugs before and what the new discount is that you got?

BECERRA: Yes. And that's where it gets a little tricky, because there are a lot of corners in the health care system. Some of them involve confidential information from companies, from pharmaceutical companies, that they don't want to disclose. And that's why the net price that Medicare pays is lower than the list price, but it's still high.

START HERE: So there's a contract somewhere that says, “No one can disclose what you originally paid.”

BECERRA: Yes. We can't bring you behind the curtain unless the drug companies tell us it's OK.

START HERE: Were you actually able to fight back against these pharmaceutical companies, or was it more like, “We ask once and we have to take what we get. We will not afford to deny the American people these drugs.”

BECERRA: Let's just say that when they came up with their offer or counteroffer, the final price was not what we had originally offered or what they had officially offered. But I'll tell you this: The Congressional Budget Office, which is responsible for Congressional budgeting, monitors the cost of legislation — is it going to save money or is it going to cost taxpayers money? And they're very stingy about saying, “Oh, taxpayers are going to save money.” Is that right?

The Congressional Budget Office said in reference to the Inflation Reduction Act and the prescription drug negotiations, “We believe that the Department of Health Human Services will save $3.7 billion in the first year of negotiations – which we just finished. And they're just projections because they didn't yet know what drugs they were talking about, etc. We believe the Department of Health Human Services will save $3.7 billion. Well, we saved $6 billion.”

And on top of that, we're saving people another billion and a half dollars. But here's the kicker: They're estimating that after ten years of negotiations, this new law will save $100 billion. So if we get almost double their first estimate in the first year, I guarantee you that in ten years we'll get more than $100 billion.

START HERE: OK, so when do the new prices go into effect, I guess?

BECERRA: January 1, 2026.

START HERE: OK, so when that goes into effect, how much of a discount is the average Medicare patient actually going to get? For example, if you were to get a 68% discount on Farxiga, a kidney medication for diabetes, does that mean the person taking that medication is going to pay for it? It doesn't mean they're going to pay 68% less. I mean, how much less would it be?

BECERRA: Yes. Remember, and this is a tough question too, because seniors don't typically pay a lot for their prescription drugs. Medicare, the program, that's the beauty of Medicare, covers the lion's share of the cost of those drugs. Some Americans still have to pay some of the cost of their drugs out of pocket, especially the more expensive drugs. So we're going to save people a lot of money.

Let's put it this way: I can talk to you in aggregate terms. We can now look at the price that we negotiated and say, “Okay, if we had had this price in 2023, what would our costs have been?” And the result is we would have saved the health care program $6 billion, and Americans will be able to save about a billion and a half dollars in total out-of-pocket costs.

START HERE: The trade group that represents companies like Pfizer, Lilly and Merck has said we may not see as much innovation because we're not getting as much money. That's kind of a constant criticism of it. They also say your calculation makes assumptions about how many people are actually saving money on this. They say very few people actually sign up for this Part D plan in a way that would actually save them money here. What's your response to these pharmaceutical groups?

BECERRA: Consider that over 50 million Americans have prescription insurance through the Medicare program, Part D. About 9 million people in the Medicare program take one of those 10 drugs. That's not a small group of people. And these are very expensive drugs. If you can bring down the price of a drug that's listed for, say, $10,000, $12,000, $3,000, that's a pretty good deal. It's still $3,000, but you've certainly saved a lot of money. If you had been getting $12,000 or $13,000 before.

This will not only save the Medicare program money, but it will save Medicare recipients money as well. And it will certainly benefit taxpayers who, when they work today, will have a portion of their paychecks deducted to cover their Medicare investments in the future so they can be eligible when they turn 65. They will benefit from a strengthened Medicare program that has these new funds available because we didn't have to spend them to overcharge ourselves for prescription drugs.

START HERE: So, I mean, the idea is you're negotiating more drug prices, right? So you've got those 10 out of the way. What are the next 10 or the next 20, or do you have an idea of ​​what types of drugs you want to target?

BECERRA: Yes. And here I have to be careful because anything we say about a drug can affect the price in the market. Right? And I don't want to be accused of trying to influence the price up or down. So what I can tell you is that the new law, the Inflation Reduction Act, has pretty clear rules about how to select these drugs that are being negotiated. That's a good thing in that politics is not a factor here. It was pretty clear which drugs count. In this case, the top ten had to be the most expensive drugs in the Medicare system.

START HERE: All right. Then we'll see what happens next. All right. Secretary Xavier Becerra, thank you very much.

BECERRA: Brad, nice to be with you.

Health Secretary Xavier Becerra calls off Medicare drug pricing talks, originally published on abcnews.go.com