This audio is automatically generated. feedback.
The Inflation Control Act has two sides to it when it comes to government spending on medicines: On the one hand, it allows Medicare to keep prices for certain brand-name drugs low through negotiations, while on the other hand, it requires state insurers to cover more costs through patient out-of-pocket caps.
But while parts of the law are already in place, the biggest overall cost savings are still years away, according to the Centers for Medicare and Medicaid Services’ latest projections.
Thanks to the new caps, out-of-pocket payments for seniors are expected to fall from 6.7% this year to 3.7% in 2025-2026, with Medicare spending increasing to make up the difference. Drug price negotiations won’t reduce spending anytime soon, either. In fact, CMS economists say spending is expected to increase in 2026, but that spending growth will “tumble” from 2027 to 2032.
According to CMS, U.S. health care costs are estimated to increase 7.5% in 2023, reaching $4.8 trillion. study The Ministry of Health expects health expenditure to increase from 17.3% to 17.6% in 2022, outpacing the national GDP’s annual growth rate of 6.1%.
Still, the pharmaceutical industry is fighting tooth and nail against the new law’s drug spending provisions, fighting what industry leaders call harm to future innovation in life sciences.
IRA Activities
The IRA’s most well-known provision among drug companies is the government’s new authority to negotiate the prices of certain drugs under Medicare Parts B and D. Starting in 2026, the first 10 types of drug waves Drugmakers are currently negotiating with the Biden administration to set prices for drugs subject to the new pricing rules. On the first round list are popular drugs such as Bristol-Myers Squibb and Pfizer’s blood thinner Eliquis, Boehringer Ingelheim and Eli Lilly’s diabetes drug Jardiance, and Bayer and Janssen’s blood thinner Xarelto.
The Congressional Budget Office previously estimated the deal would save Medicare. $100 billion Between 2026 and 2031, IRA spending limits could reduce these savings, CMS found.
The Part D out-of-pocket limit for certain drugs was one of the first provisions to be implemented in IRAs. This year, Part D beneficiaries will pay between $3,000 and $3,800 of the Part D threshold out-of-pocket cost of $8,000. The catastrophic stage Drug plan coverage is scheduled to fall to $2,000 by 2025.
While these changes will reduce out-of-pocket costs for patients, Medicare spending is expected to increase as coverage shifts, with government-run programs projected to see spending increases of 5.7% in 2025 and 8.6% in 2026.
The law in question
Big Pharma has been vocal in its opposition to the IRA, with several leaders It rang out Regarding the negative impact of this law on industry research and development, some pharmaceutical companies have argued that the Medicare price cap reduces the incentive to develop innovative new drugs. While the average cost of developing a new drug varies widely, $2.3 billion That will happen in 2022, according to a Deloitte report.
of Negotiation period The price cuts for the first 10 drugs will expire Aug. 1 and be made public the following month. The new prices will take effect the first day of 2025, but while Medicare is expected to eventually realize savings, they won’t come right away.
The IRA also requires drug companies to pay rebates to CMS if they raise drug prices faster than the rate of inflation. Start sending invoices The company has committed to collecting those payments “no later than fall 2025.” Once the negotiated rates take effect next year, CMS will no longer impose inflation penalties on select drugs. CMS said last month that Medicare beneficiaries will see lower Part B coinsurance rates for 64 drugs starting July 1 of this year “because drug manufacturers are increasing prices faster than the rate of inflation.”
“Although 2026 will be the first year in which newly negotiated prices will reduce cost sharing for certain drugs, the net increase in Medicare spending is projected to accelerate due to expected reductions in rebates for negotiated-price drugs,” the CMS report noted.
From 2027 to 2032, out-of-pocket spending growth is expected to slow to 4.2% due to projected declines in drug costs.
Although the IRA provisions are already in place, the drug companies are trying to block price negotiations through the courts, and several lawsuits brought by the drug companies are still pending. in progress And the CMS is Comment Period The application deadline is July 2nd.
