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Popular GLP-1 weight loss medications Ozempic, Wegovy, and Rybelsus are among the drugs up for price negotiation in year two of the Biden plan.
All week, we are focused on the new executive actions President Trump is putting forward rapid-fire. But I’m also interested in the actions Trump is obligated to complete, as part of the natural course of the government. One of the most important will be what he does with the ongoing effort to reduce prescription drug prices for tens of millions of Americans.
As president, Biden signed the Inflation Reduction Act, and one of its bigger inflation-reducing elements was enabling Medicare to negotiate prices with drug companies. This law has survived every effort to overturn it in court, and while it’s only gotten started, it expands as time goes on.
Ten drugs were selected for the first round, producing lower prices by up to 79 percent and an estimated government savings of $6 billion in year one when the prices become effective, as well as $1.5 billion in out-of-pocket savings for seniors. In a sadly typical example of Democratic political malpractice, the new prices kick in only in 2026, for a law passed in 2022. By way of comparison, the Johnson administration took just 11 months to get the entire original Medicare program up and running. But those savings will continue over time, as the lower prices, adjusted only for inflation, remain in place. (Typically, drugmakers raise prices annually well above the rate of inflation.)
In year two, 15 more drugs are up for negotiation, with 20 per year starting in year four. In the final week of the Biden presidency, the Centers for Medicare & Medicaid Services (CMS) announced the 15 drugs up for negotiation this year, for prices that will take effect in 2027.
They include the popular GLP-1 weight loss medications Ozempic, Wegovy, and Rybelsus, designated as one of the 15 drugs. Also on the list is Xtandi, a prostate cancer drug that was at the center of a controversy during the Biden administration over march-in rights, the ability to seize a product patent invented with funding from the government if it was being distributed on unreasonable terms. Petitioners said the price of nearly $189,000 per year was surely unreasonable. Biden’s Health and Human Services Department (HHS) agreed in December 2023 that march-in rights to lower prices was viable, but they never applied that to any drug, including Xtandi.
Now, HHS will have a chance to negotiate a lower price for Xtandi and other drugs that accounted for $41 billion in covered costs over the past year. Negotiating prices for GLP-1s in particular will be critical given their popularity; as Sen. Bernie Sanders (I-VT) pointed out, Americans pay 15 times as much for Ozempic as Europeans. The price reduction could be worth tens of billions of dollars alone. But Sanders added the most important point: “Americans may finally get a better deal on Ozempic and Wegovy—but only if Trump does not walk away from the negotiating table.”
Trump only has to follow the law his predecessor teed up for him to reap popular benefits from lower drug prices.
There are guardrails in the law designed to ensure that any administration, Republican or Democrat, participates in its implementation. Specifically, there is an upper bound for the negotiated price, known as the “maximum fair price” for the drug. Therefore, even if the HHS secretary literally decided not to ever walk into the negotiating room, that maximum fair price, which is determined through a formula of prior sales, would still have to be administered, and it would save patients and the government money.
“We predicted a hostile administration at some point,” said Alex Lawson of Social Security Works, a drug price advocate who worked on the law.
That HHS secretary, in all likelihood, will be Robert F. Kennedy Jr. In a letter to Kennedy, Sen. Elizabeth Warren (D-MA) pointed out that he has previously advocated for capping U.S. drug prices at levels closer to other industrialized nations’. She asked whether he would support implementation of the negotiating process; there hasn’t been an answer. Kennedy has a confirmation hearing upcoming, but that has not been scheduled yet.
Maybe Kennedy and his agency will actively negotiate prices, or maybe not. He seems to distrust the drug industry generally, and would prefer remedies of diet or exercise rather than their quick fixes. Specifically, Kennedy has said that Ozempic will not “Make America Healthy Again.” That puts him at odds with Ozempic patient Elon Musk, and incoming CMS administrator Dr. Oz, who has extolled the drug’s benefits. This internal sparring could delay implementation.
But there are other things Kennedy, and Trump, can do to lower the burden on the drug company CEOs they recently dined with. Many legal challenges to the law are ongoing; will Kennedy and the Justice Department continue to defend it in court? A recent revelation in the Senate confirmation process of attorney general nominee Pam Bondi speaks to that uncertainty. Bondi recently worked directly for drug giant Pfizer as a legal counsel, according to her financial disclosure form. Pfizer has financial interests in two of the 15 drugs up for negotiation this year, Xtandi and Ibrance. And it’s part of the trade group that is lead plaintiff on one of the lawsuits.
Trump’s team could also reinterpret the rules of drug price negotiation to exempt specific drugs from negotiation. But here, HHS would run into the administrative procedure buzz saw, and even the new Supreme Court ruling that revoked agency deference in interpreting the law.
Finally, Congress could take over and repeal the entire Medicare price negotiation program. Indeed, this is one of the options in the long menu of potential legislative actions put out by the House Ways and Means Committee. But while some Republican leaders have been quick to call price negotiation innovation-killing socialism, they’ve been slower to stand behind their convictions. None of the options in the Ways and Means menu advocate full repeal, just unspecified “reforms” without details. A major problem related to this, of course, is that repealing all or part of price negotiation would cost the government money, something Republicans can ill afford when trying to offset trillions in revenue reductions from extending the Trump tax cuts.
Lawson said that “the greatest protection of lower drug prices is the enormous popularity of them.” And that’s true; while the public is somewhat unaware of Medicare price negotiation (in part because of the interminable implementation timeline), they support expanding negotiating prices, not repeal.
Somewhere in Trump’s lizard brain, he recognizes that lowering drug prices is popular; he put forward international price indexing and price transparency at hospitals as ideas in his first term, neither of which were fully implemented. But that’s the point; they weren’t implemented. Trump only has to follow the law his predecessor teed up for him to reap popular benefits from lower drug prices. But favoring billionaire companies has often taken precedence.
To use one example, in the flurry of executive actions on day one, Trump quietly rescinded Biden Executive Order 14087, “Lowering Prescription Drug Costs for Americans.” Now, that order didn’t do a whole lot: It just restated what was in statute, declared that “it is critical that we take additional actions to complement the IRA and further drive down prescription drug costs,” and asked HHS to use its Innovation Center to test new models to lower prices. The Innovation Center did run some tests, including a fixed $2 co-payment on certain low-cost drugs in Medicare. But Trump wiped out this order entirely. It’s an example of the gulf between talk and action when it comes to drug prices.
“What they’re going to try to do, and Trump was good at it in his first term, is say a bunch of good things and do a bunch of bad things or nothing at all,” Lawson said. “There will continue to be a disconnect between messaging on pharma and what’s actually happening.”