Few Pricey Medications Cause Bulk of Medicare Drug Spending

The White House today named ten drugs for a first round of price negotiations with producers in an attempt to curb the exorbitant spending on prescription medication that the United States has become known for internationally. The drugs were picked from the 50 most pricey drugs in the Medicare Part D spending segment, which is a government insurance plan for seniors that pays for prescriptions. Five of the drugs are also among the ten most expensive for Medicare, namely blood thinners Eliquis and Xarelto, diabetes medications Jardiance and Januvia as well as blood cancer treatment Imbruvica.

Data from the federal agency for Medicare and Medicaid analyzed by KFF shows that just ten drugs had a share of 22 percent or $47.7 billion in all of Part D spending in 2021 despite making up only 0.3 percent of the 3,566 prescription medications the section covers. The next 90 most expensive drugs under Part D (making up 2.5 percent of drugs covered) were responsible for a combined 39 percent or more than $80 billion in spending - the same as the remaining 3,466 drugs (97.2 percent of drugs covered).

The negotiations are part of legislation passed as the Inflation Reduction Act in 2022 and are leveraging Medicare's power as one of the largest buyers of prescription medication in the country. According to Axios, the fact that the talks are taking place represents a "rare victory against the pharmaceutical industry" in the country. During the deliberations, factors like the drugs' development and production costs and whether there are alternative treatments on the market will be taken into consideration. Medicare is expected to negotiate the price of 20 drugs per year in the future to bring down spending for the government as well as seniors paying for federal insurance plans. After the drugs were announced Tuesday morning, several drugmakers' stock prices dropped. Lawsuits by producers are expected. New prices are scheduled to go into effect 2026.