Medicare will allow drug companies to negotiate drug prices

Hundreds of 1199SEIU healthcare workers held a rally and blocked 3rd Avenue where some were arrested. They were protesting health care cuts in Gov. Kathy Hochul’s Medicare budget.

Lev Radin | flare | Getty Images

Medicare announced Friday that it will give drug companies an opportunity to publicly discuss historic drug pricing negotiations under the program. The move eliminated a confidentiality obligation that the industry says violates the First Amendment in lawsuits filed this month.

In initial guidance released in March, Medicare prohibited the industry from publicly disclosing information about the lower price the federal government originally offered for drugs targeted under the program and the government’s rationale for choosing that price point.

Medicare also banned the companies from disclosing verbal conversations during the negotiation phase. Also, companies must destroy all information within 30 days if the drug is no longer selected for negotiation.

In the revised guidance released Friday, Medicare said a company “may, at its discretion, publicly disclose information about ongoing negotiations.”

The Inflation Reduction Act, passed last year, gave Medicare the power to negotiate prices directly with drug companies for the first time. The program is the central pillar of the Biden administration’s efforts to bring soaring drug prices in the United States under control

Merckthe US Chamber of Commerce, Bristol Myers Squibb and industry lobby group Pharmaceutical Research and Manufacturers of America petitioned federal courts this month to declare drug pricing negotiations unconstitutional.

Merck, the Chamber and Bristol Myers Squibb argued in their lawsuits that Medicare issued a gag order that effectively barred the companies from publicly disagreeing with the federal government’s position in violation of the First Amendment.

However, the industry’s lawsuits also focus on broader claims that the program violates due process and confiscation of private property without just compensation under the Fifth Amendment to the US Constitution.

Health and Social Affairs Minister Xavier Becerra promised on Friday to continue negotiations despite complaints from the pharmaceutical industry.

“Pharmaceutical companies have had record profits for decades,” Becerra said in a statement. “Now they are lining up to block the work of this government to negotiate better drug prices for our families.

“We’re not going to be deterred,” Becerra said

By September, HHS will publish a list of ten high-priced drugs that will be selected for trial. The companies have to decide in the following month whether they want to take part in the negotiations.

Drug manufacturers who choose not to participate face heavy financial penalties. You can avoid these penalties by opting out of Medicare and Medicaid drug rebate programs.

The companies have argued that exiting the rebate programs is not a viable alternative because the programs account for almost half of the country’s annual prescription drug spending.