IRA’s Drug Price Negotiation Program Could Save Medicare $1.8B in First Year
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IRA’s Drug Price Negotiation Program Could Save Medicare $1.8B in First Year

Aug 28, 2023

Published: Aug 03, 2023 By Tristan Manalac

Pictured: Entrance to the Department of Health and Human Services/iStock, hapabapa

When the Inflation Reduction Act’s Drug Price Negotiation Program goes into effect in 2026, Medicare may save $1.8 billion from just four medicines, according to a research brief published this week in the Journal of Managed Care & Specialty Pharmacy.

The IRA, which President Joe Biden signed into law in August 2022, empowers the FDA’s Department of Health and Human Services (HHS) to renegotiate prices for some of the most prescribed medicines starting in 2026. Specifically, during the first year of implementation, the HHS will be able to put 10 Part D drugs up for negotiation, followed by 15 more medicines for each of the succeeding two years.

A March 2023 study, also published in the Journal of Managed Care & Specialty Pharmacy, sought to identify the drugs that this negotiation program could potentially cover. Taking into account gross government spending and potential entry of generic or biosimilar competition, among other criteria, the paper expects Amgen’s Enbrel (etanercept) and Janssen’s Imbruvica (ibrutinib) to be part of the first round of negotiations.

According to the research brief, Enbrel will likely sustain a 60% discount, while Imbruvica will be subject to a minimum discount of 25%. Two other medicines—Pfizer’s Ibrance (palbociclib) and Astellas’ and Pfizer’s Xtandi (enzalutamide)—will also see at least a 25% discount. Taken together, these four drugs could save the federal government $1.8 billion.

A key objective of the IRA is to generate $25 billion in drug cost savings over the next eight years.

The March study also expects Merck’s Januvia (sitagliptin), Janssen’s Xarelto (rivaroxaban), Bristol Myers Squibb’s and Pfizer’s Eliquis (apixaban) and Lilly’s and Boehringer Ingelheim’s Jardiance (empagliflozin) to be part of the first year of IRA’s drug price negotiations.

Despite promising billions in savings, several biopharma companies have legally challenged the Medicare Drug Price Negotiation Program. In June 2023, Merck filed a lawsuit against the Biden administration, challenging the constitutionality of these negotiations.

According to the lawsuit, the program forces companies to sell medicines below market value, which Merck contends violates the Fifth Amendment’s provision that the government must provide just compensation for the public use of private property. In addition, by compelling companies to concede that these negotiated prices are fair, the lawsuit argues that the IRA also violates the First Amendment protections for free speech.

BMS followed in Merck’s footsteps a few weeks later and filed a similar legal challenge in mid-June. The U.S. Chamber of Commerce, joined by several state chambers of commerce, is also trying to stop the negotiation program, filing in mid-July a motion for preliminary injunction with a U.S. district court in Ohio.

Tristan Manalac is an independent science writer based in Metro Manila, Philippines. He can be reached at [email protected] or [email protected].

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