Four Years of Lower Drug Prices: Real Savings, Unfinished Business 

On Monday, the White House announced its latest round of “most-favored-nation” (MFN) drug pricing deals with nine more companies. The administration is touting these agreements as proof that drug prices are coming down — however, due to the opaque nature of the agreements, we don’t have the details or evidence to back that up. The agreements are voluntary, company-by-company handshake deals with no enforcement mechanism, no public reporting requirement, and so far, no independent data showing that a single patient is actually paying less. Most of the specifics of these deals haven’t been released. We don’t know actual negotiated prices, how long the commitments will last, or what happens if a company simply walks away from the deal.

Compare that to what we do know about the real, measurable decline in drug costs. This August marked four years since President Biden signed the Inflation Reduction Act (IRA) into law on August 16, 2022. And the results from this law show actual, tangible results. Last month, the Bureau of Labor Statistics reported that prescription drug prices posted their steepest annual decline since March 1963, down 3.1% over the past year. And much of that decline is thanks to the Inflation Reduction Act.

While the Trump administration wants to attribute the drop in prices to its MFN agreements and “TrumpRx” program, these policies are unlikely to have a significant impact on prices paid by consumers. The existing MFN agreements, supposedly  operating through TrumpRx, are only available if patients pay the entire cost of a prescription out-of-pocket, but in many cases, patients will likely pay less by using their insurance. And the new agreements are unlikely to save Medicaid programs much money, either. Medicaid already gets some of the steepest discounts in the country on prescription drugs, and without an independent analysis of a drug’s value, drug companies can raise prices abroad to undermine the impact of MFN agreements.

On the other hand, the impact of the IRA on consumer prices is clear. CMS expects the first round of negotiated prices, which went into effect this year, to save the Medicare program about $6 billion, and it projects that Medicare beneficiaries will save about $1.5 billion this year as a result of the negotiated prices. More savings are on the way, with negotiated prices for another 15 drugs going into effect next year.

While health care costs throughout the system are continuously rising, the largest declines in drug costs have been largely attributable to the comprehensive reforms — particularly Medicare drug price negotiation — that were included in President Biden’s lower cost prescription drug law. While the law created new, negotiated lower prices that are publicly known and result in verifiable savings, the President’s most-favored-nation deals are glorified photo-ops that can be revised or abandoned without accountability. The fight to make prescription drugs affordable can’t be won through press releases and promises. Policymakers must continue to pursue tangible, sustainable reforms.

What We Already Won

The Inflation Reduction Act included many reforms aimed at drug costs paid by patients, including:

• Medicare can finally negotiate drug prices. For the first time ever, Medicare is sitting across the table from drug manufacturers and negotiating real prices on some of the most expensive and commonly used medications seniors rely on. By targeting the costliest medications and negotiating on behalf of a program that represents a block of more than 50 million Medicare part D enrollees, this program is able to bring down costs for consumers while generating significant savings for the Medicare program, even with just the first 10 drugs of the first cycle.
• Out-of-pocket drug costs are capped for Medicare Part D enrollees. Beginning in 2025, seniors and people with disabilities with high annual drug costs began seeing serious savings through a $2,000 annual ceiling that didn’t exist before. While price negotiation is bringing down costs for the whole program, this provision is the biggest cost-saver for seniors’ individual wallets.
• Insulin is capped at $35 a month for people with Medicare. No more choosing between rationing insulin and paying rent.
• Inflation rebates are penalizing price gouging. If drug companies hike prices faster than inflation, they now have to pay Medicare back. That kind of accountability didn’t exist in 2022.

The Numbers Prove It’s Working

Medicare has already negotiated lower prices for 25 drugs, and once the next round is finalized, that number climbs to 40.  These are some of the most commonly used drugs in the country, treating heart disease, high blood pressure, blood clots, Type 2 diabetes, heart failure, arthritis, cancer, asthma, COPD, Crohn’s disease, psoriasis, HIV, and obesity, among other conditions. In other words, this program touches millions of people’s medicine cabinets — not a handful of niche prescriptions.

The savings are just as concrete. The first set of negotiated drugs delivered price cuts of 38% to 79% off the list price, with Medicare projected to save about $6 billion while families are expected to save roughly $1.5 billion out of pocket. The second set of negotiated drugs saw discounts ranging from 38% up to 84%, with projected savings of about $12 billion for Medicare and an estimated $685 million at the pharmacy counter. Add those two rounds together and you’re looking at billions of dollars redirected out of drug company profits and back toward patients and taxpayers.

These gains are significant, and more Medicare enrollees will continue to benefit from lower drug prices as the negotiation program continues to expand.  However, with few exceptions, Medicare’s negotiated prices do not apply outside of the Medicare program, leaving those with other types of health coverage stuck paying the inflated prices drug companies choose to charge. More than 40% of adults still report skipping doses, rationing medications, or going without a prescription because of cost. It’s proof of why this law matters, and why we can’t let up now.

Now Is the Moment to Set the Agenda

The Inflation Reduction Act’s drug pricing reforms are a proven foundation to build on. Continuing that progress should focus on expanding negotiation, closing loopholes, and extending savings to the commercial market. And relying on unenforceable handshake deals that may never show savings is not enough.

That’s why Families USA submitted two comment letters this month, one to the Senate Finance Committee Democrats and one to CMS, laying out where Congress and CMS need to go next. The negotiation program is proof that policy aimed at curing the actual drivers of high drug costs, not just tinkering with the symptoms, delivers real results. The task now is to build on that model.

Expand What’s Working

Why stop at a handful of drugs a year? We’re calling on Congress to:

• Increase the number of drugs eligible for negotiation, so more patients see relief, faster.
• Extend negotiated prices to the commercial market. Right now, only people on Medicare benefit from these lower prices, while everyone with employer or marketplace coverage still pays inflated rates for the exact same drug.
• Extend the existing inflation rebates to commercial insurance too, so price-gouging penalties aren’t just a Medicare-only deterrent.

Boost Real Competition

A negotiation program is powerful, but so is competition. We’re pushing for policies that:

• Close loopholes in the patent system. Abusive practices like patent thickets, product hopping, and pay-for-delay allow companies to stymie competition and keep prices high.
• Strengthen the biosimilar market. The more affordable alternatives on the shelf, the less leverage brand-name manufacturers have to set sky-high prices in the first place.
• Create real transparency requirements on launch prices, so a company can’t introduce a new drug at an outrageous price with zero accountability.

Building Independent Capacity for Drug Pricing

Congress should prioritize building the nation’s own capacity to determine what a drug is actually worth, rather than only relying on other countries’ price lists. Reference pricing tied to international prices is appealing and can be a factor in determining value, but it is vulnerable to manipulation. Manufacturers can simply raise list prices abroad, or restrict launches in reference countries, to inflate the benchmark U.S. payers end up matching. A more durable solution is to strengthen the Medicare Drug Price Negotiation Program’s own methodology, developing a rigorous, non-biased cost-effectiveness framework that ties negotiated prices to a drug’s actual clinical benefit to patients.

This kind of value-based determination, grounded in comparative effectiveness evidence, would give the U.S. an independent, transparent, and harder-to-game standard for rational drug pricing. One that reflects what a treatment is worth here rather than one exclusively based on what another country’s health system happened to negotiate.