OBJECTIVES:

The Inflation Reduction Act (IRA) of 2022 allows the government to negotiate prices of selected drugs covered under Medicare Parts B and D. Such drugs will be subjected to a maximum fair price (MFP), where the manufactures will be levied to discount their drug. As a result, commercial plans are also likely to revisit their formulary management strategy to adapt to the change in Medicare-levied prices. This research aims to describe the potential impact of IRA on pricing and management of drugs under commercial plans in response to IRA.

METHODS:

First, the IRA legislation and all associated PubMed articles related to drug pricing were identified and reviewed. Based on the review, a quantitative survey with multiple choice questions was prepared. Finally, insights were collected from survey responses of 10 administrators (pharmacy and medical directors) of key national/regional commercial plans and PBMs.

RESULTS:

Payers noted that IRA will impact drug prices both at launch and at the time of setting the MFP post-launch. They anticipate that manufacturers will launch at a premium price. As such, evidence threshold to support pricing are expected to rise, benefitting products with clear value differentiation. Additionally, to benchmark launch prices, commercial plans are likely to reference an ICER-like cost-effectiveness approach. For drugs negotiated under IRA regulations, commercial payers may further incorporate MFP into their decision making to negotiate higher discretionary discounts/rebates to force lower prices. Drugs not negotiated under IRA may also be subjected to restrictive management policies (e.g. exclusions of non-negotiated drugs in the non-protected class), as plans contend with mandated coverage of IRA-negotiated drugs.

CONCLUSIONS:

IRA is likely to accentuate the already increasing downward pressure on drug pricing. In response, manufacturers will need to develop new approaches, including economic modeling, for post-launch payer negotiations - potentially prior to implementation of IRA in 2026.