Popular diabetes drugs like Ozempic and Trulicity are among the 25 drugs for which Medicare has spent the most but have not yet been selected for price negotiation, according to a report released Thursday.
The AARP Institute for Public Policy report says the average list prices of these 25 drugs have doubled since they came on the market, and in total cost Medicare — and American taxpayers — nearly $50 billion in 2022.
About 7 million Medicare seniors used the drugs and had to pay part of the bill at the pharmacy or through mail order.
One in 5 older adults skip 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 most expensive 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 do see these remarkable price increases year after year,” said Lee Purvis, director of prescription drug policy at AARP’s public policy institute. “It’s so important that we try to discourage drug companies from accepting these regular price increases.”
Medicare makes deals with drug manufacturers
Under legislation passed in 2022, called the Inflation Reduction Act, Medicare was for the first time allowed to negotiate prices with drug companies for a limited number of drugs.
For the first round of bargaining, Medicare negotiated discounts of 38 percent to 79 percent when 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 February 1 and negotiate prices that will take effect on January 1, 2027. Another 15 drugs will be selected in 2026. for agreed prices to be introduced in 2028.
Purvis said it’s a “safe bet” that some of the 25 drugs listed in the AARP report will be in the next round of Medicare negotiations. Retail drugs that do not have a generic equivalent and have been on the market for at least seven years may be eligible for negotiation. Biological medicines, which are derived from living cells, are not negotiable until they have been on the market for at least 11 years.
AARP said five drugs that account for the largest share of Medicare spending include the diabetes drugs Trulicity and Ozempic, the asthma drug Trelegy Ellipta, the HIV drug Biktarvy and the cancer drug Xtandi.
The list price of Merck’s diabetes drug Janumet has increased 293% since it went on the market in 2007, the largest increase among all 25 drugs, according to the report. In contrast, the list price of the hepatitis C drug Epclusa has not increased since it was approved in 2016.
Pharmaceutical Research and Manufacturers of America, a trade group representing drugmakers, 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 rebates and discounts are taken into account, net drug prices have fallen over the past six years, the trade group said.
Pharmaceutical companies face inflationary penalties
The list prices of 20 of the drugs are increasing faster than the rate of inflation. Under the 2022 federal law, drugmakers must pay rebates to Medicare if list prices rise faster than inflation.
Medicare price negotiations and rebates for drugs whose prices are rising faster than inflation are important tools to help taxpayers and consumers save on drug costs, said Juliet Kubanski, deputy director of the Medicare policy program at KFF, a non-profit health policy organization.
“It does nothing to prevent manufacturers from bringing drugs to market with high prices to begin with,” Cubanski said. “But it is designed to deal with year-over-year price increases that are rising faster than inflation.”
Will Medicare turn to Ozempic for rebates?
Danish drugmaker Novo Nordisk has been scrutinized over the pricing of its hit diabetes drug Ozempic and weight loss drug Wegovy. The company’s top executive was called before the Senate Health, Education, Labor and Pensions Committee last September to answer questions about the drug’s list price.
Novo Nordisk expects Ozempic, which has been on the market since 2017, to be on Medicare’s list of drugs to negotiate price discounts, Bloomberg reported. The company told USA TODAY that it will not discuss the next round of Medicare negotiations because the list of selected drugs is not yet public.
Novo Nordisk spokesman Jamie Bennett said several factors affect drug pricing, including inflation, market conditions, actions by the government and private insurers, and drug pricing intermediaries called pharmacy benefit managers. Pharmacy managers often demand rebates from pharmaceutical companies in exchange for being placed on health insurance formularies—the list of drugs the insurer will cover.
Bennett said 80 percent of insured patients pay $25 or less per month for Ozempic, and 90 percent pay $50 or less.
“Although 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 discounts, rebates and fees that Novo Nordisk provides to lower the list price, nor does it reflect the numerous other costs in the system that ultimately affect the price that PBMs, health insurers or governments pay.”