September 26, 2024
Many plan sponsors are still skeptical about how the prescription drug provisions of the Inflation Reduction Act (IRA) will help to reduce the overall price of drugs and how this will affect what they and their members pay for their medications.
The IRA was signed into law in 2022 and included several items that affected prescription drugs and how they are paid for by the Centers for Medicare & Medicaid Services (CMS).
CMS Ability to Negotiate (Some) Drug Prices
Negotiating drug prices at the government level has been, and continues to be, particularly challenging since this put added stress on manufacturers to continue innovating at the rates that are expected by the public. The process of selecting the drugs, along with the timing of the implementation, may prove to be very inconsequential since many of the selected drugs will have completed most of their exclusivity prior to patent expiration. In addition, other more cost-effective therapies, including generics and biosimilars, may be released into the market, lessening the financial savings from these drug negotiations. Below is a list of the ten medications chosen by CMS for implementation by January 2026.
A new analysis by the Brookings Institute has 51.3% of the savings coming from just three drugs: Enbrel, Stelara and Eliquis. Almost all of these agents won’t play a role as brand name medications once 2026 arrives.
- Enbrel will have little to no impact come 2026 in light of biosimilars for Humira in the same drug class.
- Stelara will have many biosimilar competitors, including some interchangeable versions, prior to 2026.
- Eliquis has a direct competitor (Pradaxa) that is already generically available, with the potential for Xarelto to become generically available in 2025. Eliquis has all of the same indications as Pradaxa and fewer indications than Xarelto.
The total savings is estimated to save plan sponsors about 22%, which may be offset by adjustments made by manufacturers surrounding rebates attached to these medications (source: Brookings Institution https://lnkd.in/gHTCqx7j).
Below is the list of the IRA-targeted medications, along with the changes to the prices from 2023 to 2026:
Cap on the Cost of Insulin for Patients at $35 Per Month
The cap on the cost of insulin copayments applies only to Medicare members and does not apply to commercially insured individuals. Several commercial payers, however, have chosen to mimic this benefit within their benefit plans. This policy went into effect January 1, 2023. For additional information regarding this topic, visit Frequently Asked Questions about Medicare Insulin Cost-Sharing Changes in the Prescription Drug Law (cms.gov).
Penalty for Drug Manufacturers Who Raise the Price of Their Drug Faster Than the Rate of Inflation
This provision of the ACA, also known as AMP Cap or Average Manufacturer Price Cap, may be the most impactful from a financial perspective as this ties drug inflation to the rate of overall inflation. Therefore, any existing drug on the market will be required to keep their price increases each year to a reasonable level or risk being fined. So how will drug manufacturers respond to this legislation? They will likely place higher prices on their newly introduced products knowing that the income from future sales will be limited to the rate of overall inflation. So, payers need to brace themselves for higher costs for new drugs as they enter the market.
So how can plan sponsors prepare for the future and effectively manage situations like the IRA?
Innovative Rx Strategies (IRxS), a pharmacist-led pharmacy consulting organization, has developed many tools to address the ever-changing and complex world of drug inflation. IRxS will work with you and your team to strategize and implement a cost-effective plan to manage your pharmacy spend now and into the future. Feel free to contact us at www.innovativerxstrategies.com to begin a conversation on how you can save on pharmacy benefits…and don’t forget to ask about our No Risk Claims Assessment.
