August 18, 2022
Now that Medicare will be able to negotiate drug prices under the Inflation Reduction Act, the industry can expect to see some changes. Here are some tips on how to navigate the changing tide.
With a stroke of his pen, President Biden on Tuesday signed into law a massive domestic policy package with drug pricing reforms all but certain to usher in sweeping changes to the way pharma companies do business.
The Inflation Reduction Act (IRA) — passed by the House on a 220-207 party-line vote last week and signed by President Biden Tuesday — is set to limit drug companies’ pricing power by allowing the HHS to negotiate what Medicare pays for medications, starting with 10 brands in 2026 and as many as 60 drugs by 2029. Furthermore, insulin prices for Medicare beneficiaries will be capped at $35 and out-of-pocket costs at $2,000, while pharma companies will pay rebates to Medicare beneficiaries if their prices rise faster than the rate of inflation.
“It is a change to a big book of business, which is the Medicare patient population,” Muna Tuna, U.S. market access, pricing and reimbursement leader at consulting firm EY, tells PharmaVoice. “The net impact of these pieces is going to be very individual based on the company’s portfolio, pipeline, investments … every company needs to evaluate those three components from the perspective of commercialization as well as a development plan perspective.”
While it remains unclear which 10 drugs the HHS will target first for negotiation, the agency has said that it will choose from the 50 drugs that Medicare spends the most on, narrowing it down further to small molecule drugs that have been on the market for at least nine years and biologics that do not have any generic or biosimilar equivalent and have been available for at least 13 years. AARP suggests that some of these medications may include Bristol-Myers Squibb’s blood thinner Eliquis, Merck and Co.’s diabetes drug Januvia and Pfizer’s prostate cancer treatment Xtandi, among others. The HHS is expected to release its initial 10-drug list as early as Sept. 2023.
As drugmakers adapt to these policy changes and seek to mitigate their impacts, Tuna recommends three major business areas every company should reevaluate — pricing, R&D and commercial outreach.
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