29 Percent: The First Cut CMS Put on the Table
Nobody in pharma missed the number. When CMS published its opening bids for year one of Inflation Reduction Act (IRA) price negotiations, the average proposed discount landed at 29 percent below current list prices. That figure managed to land somewhere between Washington's rhetoric and Wall Street's predictions. Drugmakers called it draconian. Buyers wondered if it was just a starting point.
The list of drugs up for negotiation, Eliquis (BMS/Pfizer), Jardiance (Boehringer/Lilly), Xarelto (Janssen), Januvia (Merck), Farxiga (AstraZeneca), Entresto (Novartis), Enbrel (Amgen), Imbruvica (AbbVie/J&J), Stelara (J&J), and Fiasp/Novolog (Novo Nordisk), came as no surprise to those tracking the industry. Each blockbuster notched well over $1 billion annually in Medicare Part D spend, and each had limited direct generic or biosimilar competition locked in through at least 2026.
At RxNews.ai, analysts parsed not just the public numbers but also manufacturers’ SEC filings. While press releases stuck to “constructive engagement,” the opening offers forced real internal conversations: sales erosion, channel mix, how much pain to tolerate before risking exclusion. Some CFOs, speaking off the record, admitted that while 29 percent was certainly steep, it wasn’t as catastrophic as their own worst-case scenarios had projected. Quiet relief, even if nobody would admit it in print.
How the Numbers Break Down: Behind That 29 Percent Average
The 29 percent headline only tells part of the story. Eliquis and Jardiance, for example, reportedly got initial bids at or just above 30 percent off Medicare net costs. Drugs like Entresto and Xarelto faced a bit less, with CMS starting near 25 percent, likely because their patent protection is close to expiring and competition is on the way.
Then there was Enbrel. Amgen’s anti-inflammatory juggernaut faced a proposed cut close to 37 percent, according to sources familiar with the details. The reason? Biosimilar launches are snarled in litigation, keeping Enbrel pricey for another year, making it a target for a deeper CMS cut.
Manufacturers didn’t just accept these figures. In at least two negotiations, pharma companies shot back with counteroffers less than half the CMS discount, pointing to net prices after rebates and the impact of mandatory Medicaid rebates on their margins. Imbruvica’s case highlights what’s at stake: J&J’s own models showed a 29 percent cut would take Medicare Part D earnings from dependable profit center to barely breakeven by 2025.
Pharmacies and PBMs care about these negotiations too. CMS relied on RxInfo.ai data to set its position, so everyone along the chain is now adjusting, preparing for much thinner gross-to-net spreads on key Medicare brands.
Standoffs, Acceptances, and Quiet Calculations
Officially, every manufacturer entered “negotiation” to dodge immediate excise tax penalties. In reality, responses were all over the map. Some flashed white flags, others threatened lawsuits. J&J took Stelara into talks but also sued, arguing the IRA process is unconstitutional. Merck and BMS did the same for Januvia and Eliquis, fighting in court while their teams gathered with CMS staffers in Baltimore.
Novo Nordisk, on the other hand, took a quieter path with Fiasp/Novolog. Company memos suggest leaders saw minimal risk to commercial volume, since most Fiasp sales already ran through Medicare and Medicaid. Going along with the CMS cut, or something close, wouldn’t cost much and could keep regulators’ eyes off their more rapidly growing GLP-1 portfolio. Savvy move, really.
Not every negotiation played out so smoothly. AstraZeneca, facing a tougher SGLT2 market with Farxiga, pushed back. Execs insisted CMS overestimated the “real” net price after discounts and threatened to limit formulary support if the agency forced deeper cuts.
At this point, most manufacturers suggest they’ll accept the general direction but plan to fight out the final numbers. CMS is set to announce final deals with discounts from 22 to 33 percent, depending on each drug’s competitive context. But the market’s watching more than just those numbers, ripple effects will shape access, rebate strategies, and how future launches get priced in a new, less forgiving climate.
Implications for Retailers, PBMs, and What Comes Next
A 29 percent cut doesn’t translate cleanly to pharmacy shelves or PBM take-home pay. Pharmacies working off MAC-based reimbursement rates for these drugs face a downward reset if PBMs pass through new CMS-negotiated prices quickly. Yet PBMs may hang on to part of the margin, especially where spread pricing still flies under the radar. Users tracking the numbers on RxPBM.ai are mapping just how much of any savings is really making it to plan sponsors, and how much gets stuck somewhere in the supply chain.
Employer plans aren’t feeling much real-world impact yet (see RxBenefits.ai). Year one IRA pricing targets only Medicare, after all. But speculation is growing: will commercial contracts start to mirror these new Medicare benchmarks in 2025, or maybe 2026, especially under most favored nation clauses or the next round of PBM contract wars?
For pharma, the message is now clear. CMS is willing to demand serious discounts, but not so draconian as to drive manufacturers out of the process entirely, at least, not yet. Officials played it carefully: deep enough for Medicare savings headlines, not so deep as to upset the delicate balance of public/private negotiation. Whether that balance holds into round two, especially as patent cliffs approach and the drug list turns over, is anyone’s guess.
IRA price negotiation year one? Call it a gut punch, not a knockout. Some boardrooms had to recalibrate, and we’ve entered a new era of government-private negotiation not seen since Medicare Part D first rolled out. This isn’t the end of the story. Just the first round, more chaos and recalculation to follow.
