MGA Releases New White Paper on Medicare Price Negotiations and Drug Competition
This week, MGA released a new white paper by Alex Brill and Christy Robinson looking at the long-term effects of Medicare price negotiations on drug competition. Beginning in 2026, select prescription drugs in Medicare will for the first time be sold at prices that manufacturers were required to negotiate with the federal government. The white paper warns that the possibility of drugs being selected for negotiation will create a chilling effect on the generic and biosimilar markets.
If a brand drug’s price could be set by the government prior to generic entry, generic drugmakers’ incentives to undertake the risk and expense associated with bringing a generic to market will be reduced. The risk and cost associated with bringing biosimilars to market is even greater than for small-molecule drugs given the complexity of developing these products, and increased uncertainty will also discourage biosimilar manufacturers.
In short, price setting by the government will result in delayed competition and fewer competitors. This will result in higher overall average prices and spending, which will, over time, mitigate and potentially negate the government’s negotiated savings.
Brill and Robinson estimate unrealized annual savings of 81–88 percent of brand sales per affected small-molecule drug and 54 percent of brand sales per affected biologic. These lost savings could be expected to persist for years and could total billions of dollars.
Read the full white paper here.
