Inflation Reduction Act: Global Implications for Pricing and Reimbursement

OBJECTIVES: The Inflation Reduction Act (IRA) 2022, a United States (US) law to reduce Medicare drug costs, will begin negotiating prices for 10 products in 2026. Though a US initiative, the IRA’s impacts are global. This study aims to assess the IRA’s implications on the pharmaceutical industry globally.

METHODS: We conducted desk research to review policy papers and previous reviews on policy papers including the ISPOR posters to understand the possible global IRA implications.

RESULTS: We identified following probable IRA implications;

1. There is a growing notion that pharmaceutical industry might focus investing on ex-US countries. However, Europe, the next major market, may also be influenced by the IRA’s pricing adjustment. Instead, companies might aim to maximize returns within the first 10-13 years of a drug's launch as IRA discussion starts post this period.

2. Unlike in Europe, the IRA does not restrict biosimilar and generic pricing in the US, attracting investment in these areas.

3. Manufacturers may use high-priced US drugs as a reference for reimbursement in Europe.

4. The delayed price negotiation under the IRA allows gathering real-world evidence (RWE) for price negotiations, and evidence-based decision-making.

5. Global companies might relocate manufacturing to the US for incentives or partner with local entities for IRA negotiations, potentially altering investment patterns in Europe and other regions.

6. ISPOR Value Flower recognizes “reduction in uncertainty”, “real option value” as extended value elements of a new intervention. Manufacturers may utilize this in IRA price negotiation.

CONCLUSIONS: The IRA may cause upward pressure on drug prices in the ex-US markets. The IRA may encourage increasing RWE investment to support pricing and reimbursement, improving the evidence bases. Harmonized price negotiation addressing the drug benefit vs price needs to be established among European and other health-technology assessment (HTA) markets with the US.