OBJECTIVES:

The Inflation Reduction Act (IRA) of 2022 enacts a drug price reform allowing the government to negotiate prices of drugs covered under Medicare Parts B and D. Combined with cost-effectiveness reviews by the Institute for Clinical and Economic Review (ICER), the IRA may have a long-term impact on U.S. drug pricing. The objective of this study was to leverage the value framework employed by ICER to determine the best approach for manufacturers subjected to the IRA law during price negotiations.

METHODS:

First, using the CMS database top-selling drugs in Medicare Parts B and D (in 2022) likely to be subjected to IRA regulations were identified. Second, their evidence base to date was catalogued, including evidence package submitted for FDA approval. Third, using ICER’s Unsupported Price Increase framework: the type, level, credibility, and quality of evidence needed to inform pricing negotiations between manufacturers and payers was identified.

RESULTS:

This study indicated that IRA-mandated price negotiations may take the following 4-step evidence demonstration approach: 1) Type of evidence (e.g., benefit in additional patient sub-segments or additional benefit in the same population as label), 2) Level of evidence (e.g., product inclusion in medical guidelines), 3) Credibility of evidence (e.g., comparable endpoints across studies, patient-centric vs. surrogate), and 4) Quality of evidence (e.g., appropriate comparator). For example, manufacturers of GLP-1 products (e.g., Trulicity) provided strong quality of evidence (i.e., clinical trial data showing additional efficacy against a highly prevalent comorbidity) post-approval to support their product value. Such evidence awarded GLP-1 products favorability in compendia, formulary placement, and high Medicare sales compared to its competitors.

CONCLUSIONS:

To drive price negotiations with payers, manufacturers of drugs likely subject to IRA regulations will need to provide meaningful evidence beyond the product label that is of appropriate type, quality, as well as, has a high level of credibility.