IRA Implementation

The Inflation Reduction Act of 2022 (IRA) established the Medicare Drug Price Negotiation Program giving the federal government authority, for the first time, to set an artificial price for select drugs. These provisions allow prices to be set in the Medicare program on certain medications nine years after FDA approval for small molecule drugs (generally medicines in pill and tablet form) and 13 years for biologics. If the manufacturer of a selected drug delays the negotiation process or does not sell the drug at the negotiated price, a noncompliance excise tax of up to 1900% can be assessed on the manufacturer. Manufacturers that fail to acquiesce to the set price or refuse to participate in the pricing program will be required to withdraw all products from Medicare and Medicaid to avoid this tax.

These provisions, intended to lower costs and make medicine more affordable for seniors, represent just one of a recurring series of policies targeted toward industries investing in research for new life-changing therapies.

Advancing treatments, therapies, and cures to improve health, treat chronic conditions, and cure diseases depends on industry having the confidence to invest in scientific innovation. It is crucial that the government becomes a reliable partner in these efforts; only then will medical advances and the development of critical scientific solutions continue to improve the lives of patients.

Key challenges include:

• Price controls imposed on select small molecule drugs will reduce revenue available for investment by $232.1 billion over 20 years and lead to 116 million life years lost due to missed opportunities to improve health.
• Government-set prices on drugs covered by Medicare will likely have a detrimental impact on the availability and cost of medications for individuals with other forms of health coverage.
• Non-uniform exemptions to Medicare drug pricing negotiations will make some therapies a significantly riskier investment than others, disincentivizing research into those types of drugs even if they produce a life-changing treatment.
• The continued threat of march-in rights creates uncertainty in the intellectual property landscape and undermines investment in private-sector research and development.
• Medicare payment methods fail to adequately reimburse hospitals for new cell and gene therapies, threatening patient access and the overall market for these emerging medical technologies.

Our healthcare system must balance patient affordability and continued access to innovative therapies. This requires important modifications to mitigate unintended consequences, as well as ongoing collaboration between policymakers, industry leaders, and stakeholders to ensure the best outcomes for patients and the resilience of our healthcare system.

Solutions

HLC advocates for critical policy changes to ensure medications are affordable and that life-saving therapies and innovative technologies are brought to market to treat patients.

Specific areas for policy action include:

• Harmonize Medicare’s pricing program timeline between small molecule drugs and biologics. Promote pricing models that incentivize innovation while ensuring affordability for patients.
• Advance frameworks that make the approval process for innovative therapies more efficient and consistent.
• Support partnerships to fund research and develop new treatments.