Biden Proposes Expanding Medicare Drug Price Negotiations

Joseph Biden

Although healthcare was not the main focus of President Joseph Biden’s State of the Union Address last night, abortion rights, access to invitro fertilization, women’s health research and prescription drug prices stood out as key priorities for the president.

Early in his speech, Biden addressed abortion rights and the overturning of Roe vs. Wade and the IVF. “Too many state laws are banning the freedom to choose, criminalizing doctors, forcing survivors of rape and incest to leave their states to get the treatment they need. Many of you in this chamber and my predecessor are promising to pass a national ban of reproductive freedom,” he said.

Women’s health has been a key initiative of First Lady Jill Biden, who in November 2023 launched the White House Initiative on Women’s Health Research. The effort aims to address disparities in health and fund investments in research. In February 2024, she announced that Advanced Research Projects Agency for Health, which is part of the Department of Health and Human services, will invest $100 million this year to fund research.

During his speech, President Biden highlighted that Americans pay more for prescription drugs than people in other countries. Research from KFF bears this out. “The available evidence suggests that the U.S., on average, has higher prices for prescription drugs, and that’s particularly true for brand-name drugs,” Cynthia Cox said in a statement. She is director of the Peterson-KFF Health System Tracker, which tracks trends and issues affecting U.S. health care system performance. “Americans also have relatively high out-of-pocket spending on prescription drugs, compared to people in similarly large and wealthy nations.”

President Biden’s priority for a second term would be expanding certain pieces of the Inflation Reduction Act (IRA). In his speech, he proposed proposes a cap on insulin for everyone, including those in commercial insurance. Currently the IRA caps insulin costs to $35 for people with Medicare.

In a fact sheet released ahead of the State of the Union, President Biden also proposed expanding Medicare’s cap on out-of-pocket costs of $2,000 to those with commercial insurance, capping Medicare cost-sharing at $2 for common generics and expanding the rebates imposed on drug manufacturers for prices that rise faster than inflation to commercial insurance.

Peter Rubin

Expanding the caps on out-of-pocket to commercial plans would be a positive for patients, Peter Rubin, executive director of No Patient Left Behind, a nonprofit organization founded by patient advocates, policy leaders and pharmaceutical leaders and investors, said in an interview.

“No one takes medication for fun,” he said. “It’s good news that Biden talked about expanding out of pocket cap to commercial plans. We would think that there's opportunity make progress for patients.”

Rubin said his organization supports lowering the out-of-pocket limit from $2,000 to $1,200, which is expected to increase adherence to treatments.

Expanded Drug Price Negotations

One of the more controversial proposals Biden put forth was expanding Medicare’s drug price negotiations to include 50 drugs every year over the next decade. Currently, the Centers for Medicare and Medicaid Services is negotiating the first 10 drugs, with the new prices to go into effect in 2026.

Beyond that, CMS plans to select 15 more Part D drugs for new prices for 2027, 15 more Part B or Part D drugs for 2028 and 20 more Part B or Part D drugs each year after that.

Rubin, however, said that drug price negotiations are likely to have an unexpected consequence on small molecule innovation. The IRA allow for negotiation of drug prices for small molecules nine years following approval and 13 years for approval for biologics.

“There is a need to fix the small molecule penalty of the IRA before expanding the program,” he said. “We are starting to see a real impact, especially on small molecule drug development.”

For example, Pfizer executives recently indicated in a presentation on oncology research that they plan by 2030 to increasingly rely on revenue generated by complex biologics, including antibody drug conjugates and bispecific therapies. The IRA was mentioned as one the factors that led the company to make this decision.

Rubin said there will likely be a marketplace shift away from new drug R&D for small molecules. “Small and large molecules are both just as risky so companies follow the science,” he said. “The IRA prevents people from following the science when it comes to solving problems because of the risk to revenue.”

Pushing the time to 13 years for negotiation on small molecules would put it on parity with biologics and better align incentives, Rubin said.

No mention of PBM in State of the Union

Some political observers thought pharmacy benefit managers (PBMs) might get mentioned in the speech. Rubin said he was surprised PBM reform was not mentioned in the State of the Union.

“There is wide bipartisan support for PBM reform,” he said. “It’s also an area where there’s significant interest in ensuring that that not only occurs in Medicare, but also in the commercial plans as well. “If we’re not guaranteeing that negotiated savings get passed on to the beneficiary, we’re not helping people.”

A bipartisan bill was introduced in the House in February 2024 to address the bill was introduced by Congressman Greg Murphy, M.D. (R-NC) with Congressmen Don Davis (D-NC) and Energy and Commerce Health Subcommittee Chairman Brett Guthrie (R-KY).

Biden administration and Democrats in general have cast pharmaceutical manufacturers as the culprits behind high drug prices. But on Monday, the White House gave critics of PBMs a platform at an hourlong roundtable lowering healthcare costs and “bringing transparency to prescription drug middlemen.

Mark Cuban, the “Shark Tank” judge who co-founded Cost Plus Drugs, delivered a profanity-laced diatribe against PBMs and rebates paid by drugmakers to the companies. Sandra Clarke, chief operating officer of Blue Shield, said although it was important not to lose sight of the fact that drugmakers set prices for their products, the “complex and opaque supply chain unnecessarily drives up the costs of these drugs.”

Top administration officials attended the meeting, including Health and Human Services Secretary Xavier Becerra; Neera Tanden, a domestic policy adviser; and Lina Khan, chair of the Federal Trade Commission, which is investigating the industry.

But a White House statement on Wednesday about lowering prescription drug not mention PBMs nor did a readout of a meeting of a council on competition. Politico reported this week that the administration is creating a new task force rising healthcare costs and that drug prices will be at the top of its agenda.