Medicare Drug Price Negotiation: The Complexities of Selecting Therapeutic Alternatives for Estimating Comparative Effectiveness

OBJECTIVES: The Inflation Reduction Act (IRA) allows the Center for Medicaid and Medicare Services (CMS) to negotiate prices for the top 10 selling drugs directly with manufacturers. As part of the negotiation process, CMS will undertake comparative effectiveness research to compare the clinical benefit of the drugs subject to negotiation to those of therapeutic alternatives. At the core of comparative effectiveness research is the appropriate selection of therapeutic alternatives. Here, we propose a list of therapeutic alternatives for the 10 drugs and describe the challenges that CMS may face in selecting those therapeutic alternatives.

METHODS: We first identified all FDA-approved indications for the 10 drugs subject to negotiation. Using 2020-2021 Medicare claims data and diagnosis codes, we identified Medicare Part D beneficiaries prescribed the 10 drugs for the FDA-approved indications and report the relative prevalence of use by indication for each drug. We reviewed published clinical practice guidelines and gathered expert opinions to identify relevant therapeutic alternatives for each of the indications. Finally, we integrated the evidence on the relative prevalence of use by indication and clinical information to develop our list of proposed therapeutic alternatives for the 10 selected drugs for negotiation.

RESULTS: There were areas of uncertainty in our selection process, and we expect CMS to run into similar challenges; including 1) how to handle products approved for multiple indications (each of which may have different therapeutic alternatives) and 2) whether to restrict therapeutic alternatives to those within the same drug class or to consider any clinically comparable product.

CONCLUSIONS: The appropriate choice of a therapeutic alternative will have major implications for the initial price offers.