Top 2027 Medicare Drug Price Negotiations: Ozempic and Big Pharma's Minimal Impact
By Michael Erman
New York, Multibagger - With the U.S. government having negotiated prices for key Medicare drugs effective from 2026, Wall Street analysts are already setting their sights on the 2027 list. Among the anticipated candidates is Novo Nordisk's (NYSE:) blockbuster diabetes drug Ozempic, which is expected to have a limited financial impact on Big Pharma.
Key 2027 Drug Candidates and Their Impact
Other potential drugs on the 2027 negotiation list include:
- Pfizer's (NYSE:) cancer treatments Ibrance and Xtandi
- GSK's Trelegy Ellipta for asthma and COPD
- Teva's Austedo for Huntington's disease
- Abbvie's Linzess for irritable bowel syndrome
These drugs have been on the market since at least 2017 and are significant expenditures for the Medicare program, which serves individuals aged 65 and older or those with disabilities. Regulators will announce the list of 15 more drugs by February 2025.
Inflation Reduction Act: A Game Changer?
Under President Joe Biden's Inflation Reduction Act (IRA), prices for 10 popular Medicare prescription drugs will see cuts ranging from 38% to 79% by 2026. Despite industry concerns that price negotiations could stifle innovation, government researchers highlight the financial strain of high drug prices. For instance, Medicare spent over $4.6 billion on Ozempic in 2022, and its use for weight loss could further increase the U.S. deficit over the next decade.
Mixed Reactions from Industry and Analysts
Analysts and executives believe the financial impact of these negotiations may be less severe than feared. Many drugs on the 2027 list are already heavily discounted or set to lose patent protection around the same time. Dan Lyons, portfolio manager at Janus Henderson Investors, notes that the market has already priced in these factors, suggesting a manageable impact on companies' bottom lines.
Evan Seigerman, an analyst at BMO Capital Markets, points out that the headline discount figures are based on gross prices, not accounting for existing rebates and discounts. "You won't see much of an impact, especially for these highly rebated products," says Seigerman, listing Ozempic among them.
Novo Nordisk retains around 60% of Ozempic's list price, and executives have stated it's too early to determine the drug's impact.
Industry Outlook
Pfizer's cancer drugs Ibrance and Xtandi are also likely candidates for 2027. Despite the impending expiration of their U.S. patents, Pfizer executives are optimistic about managing the financial impact. Aamir Malik, Pfizer's Chief U.S. Commercial Officer, explains that the timing of patent expirations will help mitigate the effects.
Teva CEO Richard Francis indicates that their forecasts for Austedo account for potential price cuts under the IRA, yet they still project growth. Abbvie CEO Robert Michael also remains confident in achieving long-term financial goals even after considering drug price negotiations.
Looking Ahead: 2028 and Beyond
In 2026, regulators will announce up to 15 more drugs for negotiation in 2028, including those under Medicare's hospital program, Part B. The Congressional Budget Office predicts these negotiations will save the government $9.4 billion in the following year, up from $6 billion in the current year. Future negotiations might see fewer heavily discounted drugs, especially with the inclusion of Part B drugs.
Simplified Analysis for Easy Understanding
What is this about?
This article discusses the U.S. government's plan to negotiate drug prices for Medicare, focusing on the potential candidates for 2027, including Novo Nordisk's Ozempic, and the expected financial impact on major pharmaceutical companies.How does it affect you?
If you're on Medicare, you could see lower prices for certain high-cost drugs starting in 2026, thanks to new government negotiations. This could reduce your out-of-pocket expenses significantly.What's the broader impact?
While pharmaceutical companies may see some revenue impacts, early indications suggest these effects will be manageable. The overall goal is to reduce the financial burden on Medicare and its beneficiaries without drastically harming pharmaceutical innovation.By understanding these changes, you can better anticipate how they might affect your healthcare costs and the broader financial landscape.