Trump admin says drug price negotiations will save Medicare roughly $12 billion
By Tami Luhby, CNN
(CNN) — Medicare will save approximately $12 billion, or 44%, on 15 high-cost medications as a result of the second round of the program’s drug price negotiations, the Trump administration announced Tuesday evening. The savings are estimated based on what Medicare spent on the medicines last year.
Medicare enrollees are expected to save $685 million on out-of-pocket costs when the prices take effect in 2027.
Ozempic and Wegovy, the blockbuster but costly GLP-1 drugs often used for weight loss and diabetes treatment, are among the medications that were selected for the second round by the Biden administration just days before it left office. The negotiated price for 2027 ranges from $277 for Ozempic to $386 for Wegovy.
However, manufacturer Novo Nordisk announced a broader deal this month to sell the medicines to Medicare for $245. That agreement includes expanding Medicare and Medicaid coverage of the drugs for obesity.
Overall, the 15 medicines were used by about 5.3 million Medicare enrollees in 2024 and treat a variety of diseases, including asthma, cancer and diabetes. They accounted for $42.5 billion in prescription drug costs in 2024, before factoring in discounts and rebates that Medicare already receives.
Under the Medicare drug benefit program in effect in 2024, prior to the Inflation Reduction Act redesign, the savings would have been $8.5 billion or 36%.
While the controversial negotiation program, which was authorized by the 2022 Inflation Reduction Act, was a key way that former President Joe Biden sought to lower drug costs, it has taken a backseat in the Trump administration. Instead, President Donald Trump has opted to prioritize voluntary agreements with individual drugmakers that he says will bring the prices American patients pay in line with the lower ones available in other developed nations.
The savings that the Centers for Medicare and Medicaid Services negotiated range from 38% to 85% off the drugs’ list prices. However, this does not reflect the rebates and discounts that Medicare already receives, which are confidential, making the true savings on each medicine harder to discern.
In the weeks before announcing the second-round results, Trump administration officials sought to downplay the savings that the Biden administration had achieved on the initial 10 drugs in the first round. At a Cabinet meeting last month, US Health and Human Services Secretary Robert F. Kennedy Jr. claimed that his Democratic predecessors were lying about the savings they said they had wrangled during the first round of negotiations. Kennedy maintained that they achieved a lower price on only one drug.
The drug industry has unsuccessfully fought the negotiations program in federal court and continues to maintain that it will do more harm than good.
“We have seen that government price setting has not translated to lower out-of-pocket costs for patients and can lead to a loss of coverage for medications and higher insurance premiums,” a Novo Nordisk spokesperson said in a statement Tuesday.
First-round results
The Biden administration said last year the federal government would save $6 billion off 2023 prices in the historic initial round of negotiations, which focused on the 10 most widely used and expensive drugs used by Medicare enrollees. Beneficiaries are set to save $1.5 billion in out-of-pocket costs on those medications when the prices go into effect in January.
The $6 billion in savings for Medicare represents a 22% reduction in total net spending on the medications, which factors in the rebates and discounts, Biden officials said at the time. The Biden administration said it could not provide details about the net cost cuts for each medicine since it is competitive information, though various industry experts have estimated that officials were able to bargain deep discounts on certain medicines but much smaller price reductions on others.
It is difficult to compare the results of different rounds of negotiations because the potential for savings depends on the drugs that were selected, the competition they already face in the market and the rebates they already provide to Medicare, said Stacie Dusetzina, a professor of health policy at Vanderbilt University.
Before Tuesday’s announcement, she said it was likely that the second round will yield larger savings because it contains more cancer drugs, which typically aren’t heavily discounted. The drug selection process, deadlines and minimum discounts are largely specified in the Inflation Reduction Act.
She called the results of the second round “successful,” though she would have liked the negotiated prices for the GLP-1 medications to be more in line with the deal Trump struck with Novo Nordisk.
Many Medicare enrollees will see the savings when they pay for the medications at the pharmacy counter, Dusetzina said. For those that have co-insurance, the prices will be based on the negotiated rate. And the negotiations are expected to slow the growth of premiums in Medicare drug plans.
‘Most favored nation’ deals
Like in his first term, lowering drug prices is one of Trump’s top priorities. But in his second administration, he has opted to strike voluntary deals with individual manufacturers rather than issue regulations or work with Congress to enact laws. He is focused on “most favored nation” pricing, in which drugmakers sell their products to American patients at the lowest price available in peer countries.
So far, he has negotiated similar agreements with five manufacturers that have agreed to provide most favored nation pricing to Medicaid and to use that benchmark to launch new drugs. Also, drugmakers will sell certain medications at a discount directly to consumers through the TrumpRx online platform, which is set to launch early next year. Plus, the companies will invest more in domestic manufacturing, which will earn them a three-year reprieve on tariffs.
Only two of the agreements – with Eli Lilly and Novo Nordisk, makers of blockbuster GLP-1 weight loss and diabetes drugs – contain specific provisions that would benefit Medicare and certain enrollees.
Eligible Medicare beneficiaries will have a $50 copay for certain GLP-1 medications approved for both obesity and diabetes. The drugmakers will reduce the prices Medicare pays to $245, which will help pay for expanded coverage of weight loss drugs. The prices will take effect in mid-2026.
How effective these deals will be in lowering drug costs remains to be seen, experts said. Few details have been released, which makes it difficult to judge.
What is known is that Medicaid already receives substantial discounts from drugmakers. Also, since most drugs launch in the US, it’s unclear what global benchmark manufacturers will use to establish a “most favored nation” price. And it’s unlikely that most insured consumers will opt to buy their medicine directly from drugmakers since the costs may be higher than those negotiated by their plans.
“Overall, it’s not a suitable model for controlling drug prices for Americans,” Benjamin Rome, a health policy researcher at Brigham and Women’s Hospital and Harvard Medical School, said of Trump’s deals.
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