The Impact of the IRA

In August 2022, the Inflation Reduction Act (IRA) was signed into law, aiming to tackle rising drug costs in the US within the Medicare program, among other priorities. Under the IRA, US Centers for Medicare and Medicaid Services (CMS) will have the opportunity to negotiate a ‘maximum fair price’ (MFP) of single-source, name-brand Medicare Part B and Part D drugs with pharmaceutical companies.1 On August 29, 2023, the Negotiation Program published the highly anticipated list of the first ten Medicare Part D drugs selected for negotiation in the upcoming year, with negotiated prices to be implemented in 2026: 2,3

Unexpected drugs make the list for negotiation in 2026

Although the Negotiation Program excludes drugs with biosimilars or generics that will have been marketed nine months prior to the year of MFP implementation,3 the list includes three drugs with generic or biosimilar products on the horizon (Entresto, Stelara, and Novolog).3 Their inclusion raises the question of why these drugs were prioritized for 2026, and whether the inclusion of high-cost therapies with no expected biosimilars (i.e. Symbicort, Ibrance, Xtandi, or Breo Ellipta) would result in more cost-savings following this first round of negotiations.3 The Negotiation Program will have to determine whether the marketing status of the generic versions of Stelara and Entresto disqualifies them from negotiation.3

Financial impact on patients insured under Medicare

Considering the majority of the selected drugs treat chronic conditions, Medicare patients stand to save significantly in the long-term following implementation of MFPs in 2026.2 In 2022 alone, Medicare Part D enrollees being treated with these medications paid $3.4 billion in out-of-pocket costs.? However, patients have also voiced key concerns about the Negotiation Program: ?,?

• Applicability to patients who stand to benefit more from novel therapeutics in a clinical trial rather than their current regimen covered under Medicare
• The brief window during which patients can provide input via public comment
• A lack of clarity on key performance indicators (KPIs) to track program efficacy ?

Expect price hikes in the commercial market

By far, Medicare is the nation’s largest health care purchaser (40% of gross drug expenditures, 34% of net drug expenditures), and many of its pricing requirements already impact border pharmaceutical pricing trends across payers.? The Congressional Budget Office predicts pharmaceutical companies will set high prices for ?newly approved products in anticipation of negative revenue impacts as a result of the IRA.? Additionally, while the IRA prohibits drug price increases faster than the rate of inflation under Medicare, there is no such regulation for commercial drug units.? To disrupt pharmaceutical drug pricing on a larger scale, future legislation might address rising drug costs for both patients with and without Medicare coverage.?

Legal challenges amidst a tight timeline

Among the companies whose drugs were selected for 2026 price negotiation, Janssen, Merck, Boehringer Ingelheim, and AstraZeneca have filed lawsuits challenging the Negotiation Program.? The legal challenges claim the Negotiation Program infringes on the First (pharmaceutical companies forced to echo political messaging), Fifth (‘takings’ and ‘due process’ clauses), and Eighth (‘excessive fines’ clause) amendments of the Constitution.? Despite burgeoning legal challenges from pharmaceutical companies and trade groups threatening to impact timelines, the Negotiation Program has appeared to continue as planned. Pharmaceutical companies will have until October 1, 2023 to agree to negotiations, and October 2 to submit manufacturer-specific data.?

References

1. Centers for Medicare & Medicaid Services (CMS). Inflation Reduction Act and Medicare. Published on: 5 July 2023. Available from: https://www.cms.gov/inflation-reduction-act-and-medicare . Last accessed: August 2023.
2. Medicare Drug Price Negotiation Program. Medicare Drug Price Negotiation Program: Selected Drugs for Initial Price Applicability Year 2026. Published on: August 2023. Last accessed: August 2023.
3. Dickson S and Hernandez I. Drugs likely subject to Medicare negotiation, 2026-2028. Journal of Managed Care + Specialty Pharmacy March 2023;29:229-235.
4. U.S. Department of Health and Human Services (HHS). HHS Selects the First Drugs for Medicare Drug Price Negotiation. Published on: 29 August 2023. Available from: https://www.hhs.gov/about/news/2023/08/29/hhs-selects-the-first-drugs-for-medicare-drug-price-negotiation.html . Last accessed: August 2023.
5. National Organization for Rare Disorders (NORD). NORD's Position on IRA/CMS Drug Negotiation Price Program. Available from: https://rarediseases.org/driving-policy/public-policy-positions/inflation-reduction-act-ira-nord-point-of-view/ . Last accessed: August 2023.
6. Klein HE. Patient Joins PQA23 Panel on IRA's Potential Impact on Medication Access, Affordability. The American Journal of Managed Care (AJMC). Published on: 13 May 2023. Available from: https://www.ajmc.com/view/patient-joins-pqa23-panel-on-ira-s-potential-impact-on-medication-access-affordability . Last accessed: August 2023.
7. Arad N and McClellan MB. Drug Pricing Reform In The Inflation Reduction Act: What Are The Implications? Part 1. Health Affairs. Published on: 14 December 2022. Available from: https://www.healthaffairs.org/content/forefront/drug-pricing-reform-inflation-reduction-act-implications-part-1 . Last accessed: August 2023.
8. Gardner L. Drugmakers, trade groups push back against Medicare drug price negotiations Politico. Published on: 29 August 2023. Available from: https://www.politico.com/news/2023/08/29/drugmakers-trade-groups-push-back-against-medicare-drug-price-negotiations-00111936 . Last accessed: August 2023.
9. Medicare Drug Price Negotiation Program. Drug Price Negotiation Timeline for 2026. Last accessed: August 2023.

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