Medicare will impose $2,000 cap on prescription costs in 2025
Starting Jan. 1, Medicare will begin capping prescription drug costs at $2,000 annually, a move expected to save millions of Americans money on medications. (Scripps News)
Scripps News
Popular diabetes drugs such as Ozempic and Trulicity are among 25 drugs Medicare has spent the most on but hasn’t yet selected for price negotiation, according to a report released Thursday.
The report from AARP Public Policy Institute said average list prices on these 25 drugs have nearly doubled since they hit the market and collectively cost Medicare ‒ and American taxpayers ‒ nearly $50 billion in 2022.
About 7 million older adults on Medicare used the drugs and had to pay a portion of the bill at the pharmacy or via mail order.
One in 5 older adults don’t fill prescriptions or skip doses to save money, the report said.
About 53 million Americans were enrolled in a Medicare prescription drug plan in 2024. Enrollees who take the priciest drugs will get some relief this year with a $2,000 cap on drug costs.
But AARP officials said the report underscores the importance of empowering Medicare to negotiate prices on behalf of enrollees and taxpayers.
“We really are seeing these remarkable price increases year after year,” said Leigh Purvis, prescription drug policy principal at AARP’s public policy institute. “It’s so important to try to discourage drug companies from taking these regular price increases.”
Medicare bargains with drugmakers
Under legislation passed in 2022 called the Inflation Reduction Act, Medicare was allowed for the first time to negotiate prices with drug companies on a limited number of medications.
For the first round of bargaining, Medicare negotiated discounts of 38% to 79% when the prices take effect in 2026. The drugs are Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara, and the insulins Fiasp and NovoLog.
Medicare will announce the next 15 drugs by Feb. 1 and negotiate prices that will take effect Jan. 1, 2027. Another 15 drugs will be selected in 2026 for negotiated prices that will be rolled out in 2028.
Purvis said it’s a “safe bet” that some of the 25 drugs listed in AARP’s report will be in the next round of Medicare negotiations. Retail drugs that have no generic equivalent and have been on the market for at least seven years can be eligible for negotiation. Biologic drugs, which are derived from living cells, aren’t subject to negotiation until they’ve been on the market at least 11 years.
AARP said five drugs that accounted for the largest share of Medicare spending included the diabetes drugs Trulicity and Ozempic, the asthma drug Trelegy Ellipta, the HIV medication Biktarvy and the cancer drug Xtandi.
The list price on Merck’s diabetes drug Janumet increased 293% since it hit the market in 2007, the largest increase among all 25 drugs, according to the report. By contrast, the list price of hepatitis C drug Epclusa hasn’t increased since it was approved in 2016.
The Pharmaceutical Research and Manufacturers of America, a trade group representing drug manufacturers, said any study that relies on list prices is misleading because it doesn’t describe what people pay after rebates and insurance discounts are applied. When such discounts and rebates are factored in, the net prices of drugs have fallen for the past six years, the trade group said.
Drug companies face inflation penalty
List prices on 20 of the drugs increased faster than the rate of inflation. Under the 2022 federal law, drugmakers must pay rebates to Medicare if list prices increase faster than inflation.
Medicare price negotiations and rebates for drugs whose prices rise faster than inflation are both important tools to help taxpayers and consumers save on drug spending, said Juliette Cubanski, deputy director of the program on Medicare policy at KFF, a health policy nonprofit.
“It doesn’t do anything to prevent manufacturers from bringing drugs to market with high prices to begin with,” Cubanski said. “But it is designed to deal with price increases from one year to the next that have been rising faster than inflation.”
Will Medicare target Ozempic for discounts?
The Danish drugmaker Novo Nordisk has been scrutinized over the pricing of its blockbuster diabetes drug Ozempic and weight loss drug Wegovy. The company’s top executive was called before the Senate Committee on Health, Education, Labor and Pensions last September to answer questions about the drug’s list price.
Novo Nordisk expects Ozempic, which has been on the market since 2017, will be on Medicare’s list of drugs to negotiate prices concessions, Bloomberg reported. The company told that it would not discuss Medicare’s next round of negotiations because the list of selected drugs is not yet public.
Novo Nordisk spokesperson Jamie Bennett said several factors influence drug pricing, including inflation, market conditions, government and private insurer actions as well as drug pricing middlemen called pharmacy benefit managers. Pharmacy managers often demand rebates from drug companies in exchange for placement on health insurance formularies − the list of drugs an insurer will cover.
Bennett said 80% of patients with insurance pay $25 or less per month for Ozempic and 90% pay $50 or less.
“While the list price is set by Novo Nordisk, taken out of context it can be misleading,” Bennett said. “The list price does not reflect the rebates, discounts, and fees that Novo Nordisk provides to lower the list price, nor does it reflect the numerous other costs in the system that ultimately impact the price PBMs, health insurers or governments pay.”
