Medicare and the cost of cancer drugs

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For most of our nations’ history, Medicare was not allowed to negotiate the price of drugs. That meant pharmaceutical companies could bring drugs to market at any price without worrying that Medicare would refuse to pay for their products.

Then came the Inflation Reduction Act, a big (I won’t say whether it’s beautiful or not) piece of legislation passed in 2022 by the Democrats, without a single Republican vote. Among its many provisions, the law mandated that Medicare begin negotiating drug prices: 10 drugs the first year, 15 the next and 20 each year after that. The legislation requires Medicare to target “high grossing” drugs — ones that we spend a lot of money on either because lots patients use them, because the price is high or because of both.

That’s not a whole lot of drugs to negotiate prices on, considering the thousands of medications used by Medicare recipients each year. But it still promises to save taxpayers a lot of money. For example, on cancer drugs alone, Medicare could save more than $4 billion by targeting just four drugs.

Want to guess what those drugs are? Or what diseases they treat?

Are they drugs for common diseases, with lots of people receiving discounted drugs, thus yielding lots of savings? Or are they treatments for rare ones, where the drugs are so expensive there still lots of money to save?

I will start with drug No. 4 and see, before I get to No. 1, whether you’ve guessed the winner’s identity.

That fourth drug is Pomalyst, a treatment from Bristol Myers Squibb for multiple myeloma. That’s a relatively uncommon cancer, but the drug costs about $150,000 per year for each patient. With a discount of 30%, Medicare would save more than $500 million per year (while the drug’s patent lasts).

The third drug is Pfizer’s Ibrance, a treatment used for a subset of breast cancer patients. A similar discount would yield another $500 million per year of savings.

The second drug is Xtandi, a treatment jointly sold by Astellas and Pfizer typically used for metastatic prostate cancer.

So far we have a relatively uncommon cancer, multiple myeloma and two more common cancers but ones that potentially affect only half the population — breast cancer for women and prostate cancer for men.

Does that give you a sense of what illness is going to come out on top, as the one with the most potential savings? Perhaps a treatment for lung cancer, a common malignancy that affects both men and women?

Make sure to commit yourself to guess before I reveal the answer. Because it’s coming right now…

The No. 1 drug is Imbruvica, a treatment marketed by Abbive in the U.S. for blood cancers like chronic lymphocytic leukemia and (a mouthful of a name) Waldenstrom’s macroglobulinemia. These are not super common cancers, but the treatment costs — and please sit down for this — about $200,000 per year. If Medicare negotiates a 30% discount, taxpayers would save more than $1 billion on this drug alone.

In a free market, companies should be allowed to charge whatever they want for their products; let consumers decide whether the price is too high.

But when the consumer is a desperate patient, when the product is being paid for by taxpayers, when the basic research critical to developing the product was funded by the federal government, then it is time to push back on high prices.

The Trump administration rarely embraces Biden-era policies. But to date, it’s continued to follow through on Medicare drug price negotiations. That’s good news for American taxpayers.