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In August, Congress passed and President Biden signed historic legislation that takes important first steps toward reining in the relentless price-gouging practices of the pharmaceutical industry in the U.S.[1] Most notably, the legislation — called the Inflation Reduction Act of 2022 — requires that the Medicare program negotiate with drug manufacturers the prices of a limited number of high-cost medications.[2]
Passage of the Inflation Reduction Act represents a striking reversal of the...
In August, Congress passed and President Biden signed historic legislation that takes important first steps toward reining in the relentless price-gouging practices of the pharmaceutical industry in the U.S.[1] Most notably, the legislation — called the Inflation Reduction Act of 2022 — requires that the Medicare program negotiate with drug manufacturers the prices of a limited number of high-cost medications.[2]
Passage of the Inflation Reduction Act represents a striking reversal of the “noninterference clause” that was passed as part of the Medicare Modernization Act of 2003, which established Medicare Part D prescription-drug plans and completely banned negotiations between Medicare and pharmaceutical companies on drug prices.[3] For years, consumer-advocacy groups like Public Citizen had sought legislation that would repeal this outrageous giveaway to Big Pharma.
Under the Inflation Reduction Act, Medicare is empowered to negotiate prices for a specified number of brand-name prescription drugs that meet all of the following criteria:
- Small-molecule drugs or biologic drugs without marketed generic or biosimilar equivalent products, respectively
- Covered under the Medicare Part B program (drugs administered by physicians) or Part D program (drugs dispensed by retail pharmacies)
- Among the highest-spending Medicare-covered drugs
- Nine or more years and 13 or more years have lapsed since initial FDA approval for small-molecule drugs and biologic drugs, respectively[4]
Disappointingly, Congress restricted the number of drugs subject to Medicare price negotiations to only 10 Part D drugs in 2026, another 15 Part D drugs in 2027, another 15 Part B or Part D drugs in 2028, and another 20 Part B or Part D drugs in 2029 and subsequent years.[5]
Despite being restricted in scope and delayed several years before actual implementation, the prescription-drug price-negotiation provision of the Inflation Reduction Act will eventually lower prescription drug costs for Medicare patients and reduce drug spending by the Medicare program. The extent of the savings will depend on several factors, including which drugs are subject to negotiation, the number of Medicare patients prescribed those drugs and the negotiated prices.[6]
A second key drug-price–related provision of the Inflation Reduction Act requires that drug manufacturers pay rebates to Medicare if they increase prices faster than inflation for prescription medications used by Medicare beneficiaries.[7] This provision will be implemented in 2023, using drug-price data from 2021 as the baseline for assessing price changes relative to inflation. Another provision will limit copays for insulin to $35 per month under Medicare Part D plans starting in 2023.[8]
The pharmaceutical industry waged a ferocious advertising and lobbying campaign against these widely popular drug-price–related provisions as Congress debated the Inflation Reduction Act. Fortunately for Medicare patients, Big Pharma lost this battle.
References
[1] One Hundred Seventeenth Congress of the United States of America, at the Second Session. H.R.5376 - Inflation Reduction Act of 2022. https://www.congress.gov/bill/117th-congress/house-bill/5376/actions. Accessed September 6, 2022.
[2] Henry J. Kaiser Family Foundation. Cubanski J, Neuman T, Freed M, Damico A. How will the prescription drug provisions in the Inflation Reduction Act affect Medicare beneficiaries? August 18, 2022. https://www.kff.org/medicare/issue-brief/how-will-the-prescription-drug-provisions-in-the-inflation-reduction-act-affect-medicare-beneficiaries/. Accessed September 6, 2022.
[3] Lee TT, Gluck AR, Curfman GD. The politics of Medicare and drug-price negotiation (updated). Health Affairs. September 19, 2016. https://www.healthaffairs.org/do/10.1377/forefront.20160919.056632/. Accessed September 6, 2022.
[4] Henry J. Kaiser Family Foundation. Cubanski J, Neuman T, Freed M, Damico A. How will the prescription drug provisions in the Inflation Reduction Act affect Medicare beneficiaries? August 18, 2022. https://www.kff.org/medicare/issue-brief/how-will-the-prescription-drug-provisions-in-the-inflation-reduction-act-affect-medicare-beneficiaries/. Accessed September 6, 2022.
[5] Ibid.
[6] Ibid.
[7] Ibid.
[8] Ibid.
