The Inflation Reduction Act – What’s Happening Now?
The Inflation Reduction Act (IRA) was probably President Biden’s most important piece of legislation passed during his four years. It contained many different parts but, as is always the case, my ultimate focus in this blog will be on how it impacts our healthcare. I will only describe its effect on other parts of the healthcare business and their possible reaction to further clarify how it will ultimately affect you and me. I will also try to predict how the new administration might impact the implementation of the IRA. As you might imagine, this will be no easy task, and if my assumptions prove to be wrong, I’ll try to be forthright in pointing out my error, and if I’m right, I’ll try to be humble in describing my exceptional skill.
From my point of view, the best part of the IRA is the $2,000 cap on out-of-pocket costs for prescription drugs that started this year. It has been a change that I’ve lobbied for since Part D, the prescription drug program, was passed. At first glance, some may say that it didn’t affect most seniors since it is estimated that it will only save money for 9.3% of seniors this year, but that is a very shortsighted view of its impact. The other 90.7% of us no longer worry about the threat of medical bankruptcy hanging over our heads if we get sick. From my own experience and in talking with friends, I can safely say that it has alleviated a worry that has troubled 56 million seniors for a long time. It has also helped millions of younger people as they plan for their retirement, enabling them to quantify the yearly maximum that will be required for prescription drugs. This $2,000 cap has certainly benefited a lot of people.
Unfortunately, I now need to talk about a downside of the IRA, the drug price fixing program. I’ve written multiple blogs about the negative impacts of this scheme, here, here, and here, they will explain in more detail why price fixing has proven historically to be a long range failure. They also highlight why this approach will inhibit the discovery of new medicines and why some simple changes could correct a few of the unattended consequences of the IRA. What I will discuss today is the current status of the price-setting program and what else will happen this year.
The first year of the Centers for Medicare & Medicaid Services (CMS) setting the Maximum Fair Price (MFP), which is another way of saying fixing the price, for 10 drugs is done, called IPAY 2026. The second year has started, IPAY 2027, with the Biden administration identifying 15 drugs, ahead of schedule. They also released the required price justification used for IPAY 2026 prior to the required March 1st deadline. I think they took both of these actions to have some initial impact on IPAY 2027 before the Trump administration took over.
There are some things we can learn from these two actions. The price justification information was not very detailed, but it was evident that CMS did not give the same weight to the manufacturer’s justifications and took a different approach to categorizing some of the medicines. CMS’s pricing also devalued the income produced when new applications were found over the drug’s life. As I said earlier, it is difficult to predict what the new administration will do, but some possible scenarios are to change the way drugs are selected and redefine how the competition of generics and biosimilars is calculated. They could also get more aggressive in establishing the MFP, even to the point of considering international reference pricing in their pricing justification. I’m not sure we can take anything off the table. Another item of note was the selection of three drugs that have the same basic GLP-1 ingredient used for both diabetes and weight loss. This set a precedent since it only used one of the 15 available selections when it selected the three drugs. This broadens the power and breadth of drug selections. Finally, three of the selected drugs were listed as alternatives to three drugs selected last year, which could put further pressure on this year’s prices for this type of drug. All of these actions broaden the already exceptional power the government is wielding over our prescription drug program.
The inclusion of drugs that are very popular and effective for losing weight has added an interesting wrinkle to this year’s list. The Biden administration recommended that Medicare begin covering these drugs for obesity. The positive impact on health cannot be overemphasized, but many commercial plans and Medicare don’t cover them. These drugs are expensive, which has put them out of reach for many Americans. It will be interesting to see how the new administration deals with this issue.
The next thing that will happen this year is the patient-focused round tables and town halls for the 15 selected drugs. Last year these forums consisted of the public talking and the government listening, at least that’s what they said they did. What the public forums weren’t . . . was a discussion. I have to admit that I’m not encouraged that the new administration will improve this part of the program. They recently canceled the Advisory Committee on Immunization Practices, which is an advisory committee to the CDC and includes public written and oral input. I have testified at multiple advisory committees, both at the CDC and the FDA. I hope this isn’t a precursor to a reduction in public input. We expect the scheduling of these public forums in March or April.
Well, that’s what’s happening right now. I hope the new administration recognizes the importance of encouraging the development of new medicines and recognizes the value of listening to those they serve. I’ll try to keep you up to date on what’s going on in Washington.
Best, Thair