IRA negotiations conclude, will save Medicare $6 billion

The negotiations are over for the first 10 drugs that will be subject to price controls under the Joe Biden administration’s Inflation Reduction Act (IRA). Officials say the new prices, which range from 38–79% of 2023 prices and come into effect in 2026, will save Medicare, a US federal health-care insurance system, $6 billion and Medicare enrollees $1.5 billion in out-of-pocket costs in that first year.

Pharmaceutical companies decried the law, saying that it would puts price controls on drugs for the first time in US history and that innovation would ultimately suffer, as less money would be available to fund the discovery of new drugs. But a recent study led by Fred D. Ledley of the Center for Integration of Science and Industry at Bentley University found that the IRA “could have little or no impact on the number of drug approvals” (Soc. Clin. Trials 2024, DOI: 10.1177/17407745241259112).

Despite their earlier warnings, in earnings calls ahead of the price announcements, pharma executives minimized the upcoming decision’s potential adverse impact. Bristol Myers Squibb (BMS) CEO Chris Boerner told investors last month that “we’re increasingly confident in our ability to navigate the impact of IRA on Eliquis.” Under the price setting agreement, the cost of Eliquis, an anticoagulant that BMS developed with Pfizer, will decrease from $521 for a 30-day supply in 2023 to $231 in 2026—a drop of 56%— according to data from the Centers for Medicare and Medicaid Services.

During Pfizer’s second-quarter earnings call, Chief Financial Officer Dave M. Denton described the impact of the price setting agreement on the firm as “somewhat muted” because the company has no products in the first round of negotiations beyond Eliquis. Any drugs included in future rounds will already be approaching the end of their patent protection, he said.

Executive’s bullishness does not mean the pharma industry now supports the law, however. “I will say this is a piece of legislation that clearly is harmful for supporting research and development in the sector,” Denton also said last month. “We’re hopeful that this could be changed in the future, but we will continue to actively manage our way through this.”

BMS issued a statement Aug. 15 saying that the new maximum fair price for Eliquis “does not reflect the substantial clinical and economic value of this essential medicine. . . .

“. . . By focusing on government price setting, the IRA overlooks the biggest problem in patient affordability: how plans determine patient out-of-pocket costs.”

Additional rounds of negotiations mean that around 60 different drugs will ultimately be subject to price negotiations. The next batch is not known yet.