Medicare Quietly Gifted AbbVie’s Blockbuster Drug Seven Extra Years Before Price Negotiations
Trump Proposed Rule Would Continue Policy, Benefiting Drugmakers at the Expense of Seniors, Taxpayers
By Sarah Karlin-Smith
Key Takeaways:
- AbbVie’s Creon appeared to meet all the qualifications for selection to Medicare’s Drug Price Negotiation Program (MDPNP) in 2025, including having more spending in 2024 than six other products Medicare picked for the second round of negotiations. But the drug is not in the group of medicines whose negotiated prices will take effect in 2027, or Initial Price Applicability Year (IPAY) 2027.
- More than 185,000 Medicare beneficiaries used Creon in 2024, costing Medicare $1.49 billion in gross spending[1]. The drug picked in Creon’s place for IPAY 2027, Amgen’s Otezla, accounted for about half a billion less Medicare spend ($1.05 billion) over the same period and was used by only 31,000 beneficiaries. Medicare was entitled to a much larger mandatory discount on Creon than Otezla.
- A Public Citizen investigation found that Creon’s lack of selection for Medicare price negotiation was due to a quiet change in policy interpretation between the first and second cycles of the program that was not initially publicly debated or thoroughly justified.
- The policy change will give Creon seven extra years before it can be selected for drug price negotiation. At least two other drugs, Novo Nordisk’s Tresiba and Nestle’s Zenpep, will likely get a similar perk. This runs counter to Congress’s intent and will harm seniors who could benefit from Medicare negotiating the prices of these medicines sooner.
- Comments on the policy change, which is codified in the proposed rule issued June 12 for the upcoming round of Medicare negotiations, IPAY 2029, are due by Aug. 17.
Background
The Inflation Reduction Act (IRA) of 2022 allowed Medicare for the first time to use its substantial leverage to negotiate a limited number of drug prices each year for its beneficiaries. The law gives small molecule drugs approved under new drug applications (NDA) seven years before prices can be negotiated. Biologic medicines approved under biologic license applications (BLA) get 11 years before they are eligible for selection in the Medicare Drug Price Negotiation Program (MDPNP). It takes two additional years for the price to be negotiated and implemented from the time it is eligible for selection, meaning that small molecules get at least nine years before a negotiated price takes effect and biologics get at least 13 years. Drugs must meet other criteria to be selected for negotiation, including hitting certain Medicare spending thresholds and lacking “bona fide” generic or biosimilar competition, meaning that all products eligible for negotiation are older medicines that are still under monopoly control and costly to the Medicare program. Even for drugs with prices negotiated by Medicare, Americans still typically pay more than other countries of similar size and wealth, and prices far exceed the marginal cost of production.
Negotiation program criteria already are very generous to drugmakers, allowing them too much time to set unaffordable price points and gouge American patients. Some patients are forced to forgo treatment with needed drugs due to high prices. Public Citizen has called on Congress to amend the law so that all brand drug prices could be negotiated at or soon after market launch. This is consistent with practices in other similar countries. In the interim, it is critical that the Centers for Medicare and Medicaid Services (CMS) execute the current drug price negotiation program in a manner that gets the best deal for Americans. But AbbVie’s Creon was not picked for Medicare’s second round price negotiation, or Initial Price Applicability Year (IPAY) 2027, despite seemingly meeting all the criteria laid out in law and guidance and having $1.49 billion in gross Medicare spending in 2024 per Medicare’s drug pricing dashboards, more spending than six other drugs picked by Medicare for IPAY 2027. Why?
Sub Silentio
Creon is a pancreatic enzyme prescription medication used by people who cannot digest food normally. More than 185,000 Medicare beneficiaries used the drug in 2024. Creon was first approved as a new drug by the Food and Drug Administration (FDA) in 2009, and its manufacturer AbbVie made $13.52 billion in net revenue in the U.S. on the drug from 2011-2025.[2] Due to the unique regulatory history of pancreatic enzyme products, versions of Creon have been available in the U.S. since 1987.
A Public Citizen investigation found that Creon’s lack of selection for price negotiation was due to a quiet change in policy interpretation that CMS made between the first and second years of the drug price negotiation program, outside of the formal Oct. 2024 guidance that implemented the program for IPAY 2027. Draft and final guidance are published several years in advance for future negotiation years, referred to as IPAY. Starting in IPAY 2029, CMS is required to implement the program via rulemaking.
An infographic created on February 26, 2025, more than a month after CMS published the list of drugs selected for the 2027 negotiation cycle, contains some text that explains Creon not being selected but is highly technical and may not be obvious to even well-versed drug policy experts. In fact, many experts who modeled likely drug candidates for IPAY 2027 believed Creon would be selected as well.
It wasn’t until CMS issued draft guidance in May 2025 for the third round of drug price negotiations, IPAY 2028, that CMS offered a more formal indication of why Creon didn’t make the 2027 list. The policy change is also in the proposed rule for the program for IPAY 2029 issued June 12. Comments on the proposed rule are due by Aug. 17.
The May 2025 draft guidance says that when dealing with biologics that were previously submitted to the FDA as small molecules or NDAs, but were later deemed to be approved biologics license applications (BLAs) effective March 23, 2020, that CMS will use March 23, 2020, as the licensure date for the purposes of identifying whether 11 years have elapsed since the date of licensure, allowing a drug to be picked for negotiation. This “deeming policy” means that Creon’s clock for negotiation eligibility starts March 23, 2020, the date it became regulated as a BLA, not 2009, the date it was first approved as a drug by the FDA under an NDA. The choice delays Creon’s eligibility for price-cutting negotiation by about seven years.
The draft May 2025 guidance acknowledges that this was not CMS’s policy in IPAY 2026, the first year of the program, saying that “no interested party suggested interpreting the statute to make the March 23, 2020, deemed date for biologics the licensure date for this purpose.” Moreover, in 2026, CMS selected Novo Nordisk’s insulin aspart products, Fiasp and Novolog, for price negotiations, a drug that, like Creon, was initially approved under an NDA but was later deemed a biologic under the Biologics Price Competition and Innovation Act of 2009 (BPCIA), which became law in the 2010 Affordable Care Act.
CMS Decision Runs Counter to FDA Application of Law
Through the Biologics Price Competition and Innovation Act, Congress created a pathway for drugmakers to get cheaper biosimilar versions of complex biologic medicines approved. The 2010 legislation changed the definition of “biological product”, necessitating that the FDA reclassify some protein products like insulins or Creon that were historically approved as NDAs, not BLAs. After a lengthy process of rulemaking and guidance and a transition period, the FDA issued a list of the products approved under NDAs that were deemed to be BLAs on March 23, 2020. The list of drugs includes a range of products, some approved more than 50 or 60 years ago.
A prime motivation for converting these medicines from NDAs to BLAs was that their complexity made it difficult to get a substitutable generic approved. Once classified as BLAs, the biosimilar pathway offered an opening to bring down costs.
This history makes CMS’s IRA policy interpretation baffling, as CMS’s policy does the opposite of what the BPCIA intended: allowing these drugs another way to maintain high prices for more years. The FDA, on the other hand, understood that the conversion of these NDAs to BLAs did not suddenly make old products new again. For example, FDA guidance made clear that the transition from NDA to BLA would not entitle a product to obtain the 12-year exclusivity period the BPCIA granted for newly licensed biologics. FDA specifically distinguishes a drug that was first licensed under the biological pathway to be different from a drug that was originally approved as an NDA and later “deemed licensed” under the pathway due to the BPCIA.
What is the Reason for the Change?
Amgen, the sole party who publicly commented on CMS’s policy change following the May 2025 draft guidance, told CMS that its decision is “improper because it conflicts with the FDA’s prior findings as to approval dates for deemed biologics.” The agency’s list of licensed biological products known as the “Purple Book” identifies the approval date of deemed biologics as the date of their original NDA approval, Amgen wrote. The drug manufacturer also took issue with the process CMS went through in making the policy change. “CMS adopted this new interpretation without any, let alone sufficient administrative process,” Amgen wrote. CMS also did not explain why it changed its interpretation, other than “no ‘interested party’” initially brought the issue to its attention for IPAY 2026, the company said. Amgen suggests that CMS’s stated reasoning for the change and the absence of public comments on the topic for IPAY 2027’s 2024 Draft Guidance imply the “interested party” brought the issue to CMS’s attention “outside of the public process.”
CMS’s final version of the 2025 guidance for IPAY 2028 doesn’t provide any additional new information on why it changed its policy on deemed biologics following IPAY 2026, nor does CMS address the inconsistencies between the FDA’s treatment of deemed biologics when it comes to identifying their original approval date and CMS’s interpretation.
Amgen likely had a vested interest in protesting CMS’s change in policy for deemed biologics. Amgen’s Otezla (apremilast) was the 15th or last drug to be selected for IPAY 2027 based on total prescription drug spending. The company’s product would not have been picked if Creon had been selected.
Patient Fallout
CMS’s policy on deemed biologics will give a select group of drug companies extra time to rake in higher profits before the government can negotiate the cost of those drugs. This will cost the government more money and compromise patient access. The IRA requires that drugs selected for the Medicare price negotiation program be covered by all Medicare Part D plans, which has improved coverage of these drugs. Medicare beneficiaries also may pay higher coinsurance due to a high-spend drug’s escaping negotiation.
Creon’s exclusion from IPAY 2027 price negotiation is a double whammy for many patients relying on the drug, as patients faced large price increases when the FDA changed the regulatory requirements for pancreatic enzyme products at the beginning of the 21st century. That regulatory change led to a more concentrated market. AbbVie, which currently holds the U.S. rights to Creon, has made $13.52 billion in net revenue in the U.S. on the drug since 2011.
Because the Medicare price negotiation program obligates CMS to select the maximum number of drugs statutorily allowed for negotiation each year, if there are products that meet the eligibility criteria, other products should get selected in place of drugs like Creon. However, this may force Medicare to select drugs that cost the program less money overall, as it did with Creon, achieving less savings for taxpayers.
Medicare’s decision not to select Creon for IPAY 2027 meant the agency had to go further down its list of drugs with the most gross spending in the program to fill out that round of price negotiation. Instead of picking Creon, a drug with $1.49 billion in gross spending in 2024 used by more than 185,000 beneficiaries, it picked Otezla, a drug that accounted for about a half billion less Medicare spend over the same period and was used by only 31,000 beneficiaries. Medicare would have been entitled to a larger mandatory discount on Creon, than Otezla if the deeming policy was not in place. As a long-monopoly drug, approved for more than 16 years before the negotiated price would take effect, the statutory upper limit for the maximum fair price for Creon would be 40% of the drug’s average non-federal average manufacture price (non-FAMP). Non-FAMP is the average price wholesalers pay manufacturers for drugs distributed to non-federal purchasers. Because Otezla has been on the market a shorter period – since 2014 – the statutory upper limit for the drug is 75% of the drug’s average non-FAMP. Creon also appears to be a lower-rebated drug than Otezla, which means the government would have a greater opportunity for additional savings via negotiation than with Otezla. Creon’s net price is estimated to be about 20% lower than its list price, whereas Otezla’s, in the crowded class of disease-modifying anti-rheumatoid drugs, net price is likely 30% to 40% lower than its list price.
Moreover, some experts have predicted that due to the exclusion of drugs with less than $200 million in annual Medicare spending and other exemptions, there may be a point at which there are fewer drugs eligible for negotiation than the 20 CMS is obligated to select for price negotiation each year. In that scenario, if Medicare defers negotiation on a drug like Creon due to the March 2020 start of the negotiation delay clock, then there will not be another drug negotiated in its place, further raising taxpayer costs.
Delaying a drug like Creon’s eligibility for Medicare negotiation also could mean that some of these drugs never have a negotiated price because biosimilar competition comes on the market before or during the negotiated period. Only single-source drugs without generic or biosimilar competitors are eligible for negotiation. If Creon faces biosimilar competition before IPAY 2034, then it will evade price negotiations entirely.
Public Citizen identified two other drugs that would stand a good chance of being picked for Medicare drug price negotiations in the next few years if it weren’t for the deeming policy. Those drugs include Novo Nordisk’s Tresiba (insulin degludec) which was first approved in September 2015.
Medicare spent $1.83 billion in gross dollars on Tresiba in 2024 and $1.57 billion in 2025. Based on the drug’s original FDA approval year, it could qualify for IPAY 2029 if not for the deeming policy put forth by CMS. Under the CMS proposal, Tresiba couldn’t be selected for negotiations until IPAY 2034, giving Novo Nordisk five additional years of unmitigated pricing without Medicare negotiation. Since 2016, the first year Tresiba was on the U.S. market, Novo Nordisk has made $13.23 billion in international net sales on the drug.[3]
The third drug that would likely be picked for Medicare negotiations earlier, if not for the change in policy, is Zenpep, another pancreatic enzyme product that was granted an NDA on Aug. 27, 2009. Zenpep had $709.48 million in gross sales in Medicare Part D in 2025 and $597.44 million in 2024. Zenpep has gone through several owners since 2009. Its current owner, Nestle, bought the drug in 2020. Nestle does not break out its revenues for the drug in financial filings
Future Impacts
There is a real possibility that CMS’s deeming policy could impact other products not on the FDA’s 2020 list of drugs that were converted from NDAs to BLAs due to the BPCIA, as there is reason to believe that in the future the agency could have to reclassify other drugs. The FDA is currently tasked with better defining biologics due to an ongoing legal battle with Eli Lilly. The BPCIA updated the definition of biological product to include “protein” or “analogous product.” In 2020, the FDA finalized its definition of protein in rulemaking. Since that decision, the FDA has faced legal challenges related to its interpretation of “analogous to a protein.”
Eli Lilly believes the FDA misclassified its experimental GLP-1 retatrutide as a small molecule, not a biologic. In Sept. 2025, an Indiana district court judge ruled that the FDA’s classification of Lilly’s drug wasn’t arbitrary, but it also set aside a secondary FDA determination that the product is not “at least analogous to a protein” and asked the agency to better define this classification. FDA’s eventual definition of products that are analogous to proteins could impact what products are regulated as drugs or biologics. If any drugs are converted to biologics post-approval, under CMS’s current interpretation, they’d likely get to restart their clock under the Medicare drug price negotiation program and delay or escape price negotiation.
The implications of a potential reclassification of a drug like retatrutide post-approval would be huge, as the drug, which is currently being studied for obesity and a range of related conditions, including diabetes, heart and kidney problems, and liver disease, is expected to be a multi-billion-dollar blockbuster. Every year that CMS is prevented from negotiating the price of this drug could cost the U.S. government vast sums of money.
It is possible that Medicare will have plenty of drugs to negotiate in place of a product like retatrutide. But these drugs are likely to cost Medicare less money, resulting in billions of dollars in lost savings.
Conclusion
The IRA already gives drugmakers too much time on market before Medicare drug price negotiations can kick in. Now, CMS is proposing to codify in rulemaking a policy that would grant some products even more time on market before they could be eligible for negotiations, without any clear policy rationale. This is unacceptable. As drug development and regulation have evolved over the years, the FDA, under the direction, of Congress has pivoted to regulating some drugs as biologics that were once regulated as drugs. But this switch, which was done in large part to encourage cheaper competition known as biosimilars, did not make old drugs new again or erase the many years of revenues without Medicare-negotiated prices that drugmakers earned on these reclassified products. As such, the treatments’ initial FDA approval dates should start the negotiation eligibility clock, not the date the application was converted from a drug to a biologic. Doing the latter unfairly gives preferential treatment to certain products and harms patients at the expense of big pharma.
CMS should immediately rectify this policy in final rulemaking for IPAY 2029. Congress should go further and make this issue a moot point by eliminating the Medicare drug price negotiation program’s delay periods and requiring Medicare to negotiate the prices of all branded drugs at launch.
[1] Medicare Part D gross spending figures pulled from public data available on data.cms.gov.
[2] Data pulled from SEC filings. Solvay Pharmaceuticals received FDA approval for Creon on April 30, 2009. Abbott acquired Solvay and Creon in Feb. 2010. In 2013 Abbott’s pharmaceutical business was spun off into AbbVie which has since marketed Creon in the U.S. AbbVie does hold the rights to market the drug outside the U.S. 2011 was the first year that SEC filings broke out U.S. revenues for Creon.
[3] Tresiba was first approved internationally in 2013. Data compiled from SEC filings.