Health Reform

Impact of IRA on drugs prices

How much money will IRA save Medicare? A paper by Hernandez et al. (2023) aims to answer this question. The methods they use are as follows:

For the 10 drugs likely subject to negotiation by Medicare in 2026 based on 2020 gross spending and loss of exclusivity, we extracted 2020 data from 5 sources: (1) net sales from SSR Health; (2) total units sold in the United States from IQVIA National Sales Perspective data; (3) 2020 Part D claims from a 5% sample of Medicare beneficiaries; (4) units and spending from the Centers for Medicare and Medicaid Services (CMS) spending dashboards; and (5) drug age from the US Food and Drug Administration website.

Based on this approach, the authors find that:

The minimum discount stipulated by the IRA exceeds 2020 rebates for only 4 of the 10 drugs expected to be negotiated in 2026…These include etanercept (Enbrel), which will be subject to at least a 60% discount, up from an estimated rebate of 39.1%, and the cancer drugs ibrutinib (Imbruvica), palbociclib (Ibrance), and enzalutamide (Xtandi), all of which will be subject to a minimum discount of 25%, up from estimated rebates of 9%, 5.7%, and 15.0%, respectively. Based on 2020 gross spending, the minimum required discount on these 4 drugs combined would generate savings of $1.8 billion

Why are only 4 of 10 drugs likely to have lower prices under IRA? The reasons is that rebates are already very high for 6 of the 10 remaining drugs of interest.

You can read the full paper here.