Prescription drug pricing needs to change, panelists say

Perhaps the last issue in the U.S. that people of all political persuasions can agree on is that prescription drug prices are too high.

That’s according to Sarah Emond, president and CEO of the Institute for Clinical and Economic Review. She was one of a panel of experts who discussed drug affordability during the AHIP Medicare, Medicaid, Duals and Commercial Markets Forum in Washington.

She called for policymakers to come up with solutions “to voluntarily de-escalate where we are with drug pricing.”

“We can make different choices,” she said. “The status quo is harming patient affordability.”

“We’re in a place where, because of pressures on the pharmaceutical industry, the industry is rethinking its pricing policies,” said Robert Popovian, founder of Conquest Advisors and senior health policy visiting fellow at Pioneer Institute. “It is a positive step because we don’t want regulators doing it for them.”

Right to negotiate

The Inflation Reduction Act gave the federal government the ability to negotiate prices for certain high‑cost prescription drugs covered by Medicare. The negotiated price produced by that process is legally called the Maximum Fair Price. This practice was previously prohibited by the Medicare “non‑interference” clause.

Negotiation applies to single‑source brand drugs with no generic or biosimilar competition. The first round covers 10 Medicare Part D drugs, with negotiated prices effective Jan. 1, 2026. The number of negotiated drugs grows over time:

• • 15 drugs in 2027
  • 15 more in 2028
  • 20 drugs per year beginning in 2029

The Centers for Medicare and Medicaid Services estimates that the first 10 negotiated drugs will reduce Medicare spending by about $6 billion annually, based on 2023 utilization volumes. Some negotiated prices are 40–60% lower than prior list prices.

The IRA “created an environment where we know what the net prices of drugs are,” Popovian said. “It will put pressure on entities that make money on margins. Pharmaceutical companies won’t be in bad shape after the IRA – it’s all the other entities that make money on margins that will be affected.”

Maximum fair pricing “will help consumers,” Popovian said. “And, no doubt, the $2,000 cap on out-of-pocket prescription drugs under the IRA helped Medicare Part D consumers.”

“The pharmaceutical industry knows things have to change,” Emond said. “They’re ready to make changes.”

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].