Global Experts Highlight Concerns With Implementation of IRA-Mandated Medicare Drug Price Negotiation Program

Published Dec 5, 2023

Lawrenceville, NJ, USA—December 5, 2023—Value in Health, the official journal of ISPOR—The Professional Society for Health Economics and Outcomes Research, announced today the publication of 2 new commentaries by leading experts in health economics and outcomes research (HEOR), both of which raise important questions as the Centers for Medicare & Medicaid Services (CMS) move forward to implement the Inflation Reduction Act’s (IRA) Medicare Drug Price Negotiation Program. The reports, “Has the Centers for Medicare & Medicaid Services Implicitly Adopted a Value Framework for Medicare Drug Price Negotiations?” and “Section 50 of the Inflation Reduction Act Drug Price Negotiation Program: Considerations for the Centers for Medicare & Medicaid Services, Manufacturers, and the Health Economics and Outcomes Research Community,” were published in the December 2023 issue of Value in Health.

In the first commentary, authors Sean D. Sullivan, Inmaculada Hernandez, Scott D. Ramsey, and Peter J. Neumann describe the process and evidence considered in establishing the initial price offer and discuss what they believe to be the inherent value framework underlying the initial price offer and its implications for evidence assessment and generation.

“The process articulated in the guidance by CMS suggests an implicit value framework for collecting and integrating evidence necessary for developing the initial price offer at the start of the negotiation process,” said author Sean D. Sullivan, PhD, “although without an explicit quantitative or mathematical approach.” CMS’s revised guidance is explicit as a value framework in some respects yet remains opaque in other important ways, particularly in the selection of therapeutic alternatives and the process by which CMS will integrate evidence across multiple indications. Additionally, the authors note that the lack of predetermined thresholds for weighing increments in clinical benefit against increments in prices casts a major shade of opacity over the negotiation process.

The second commentary by John O’Brien and Jan Hansen warns that CMS’s ambiguous standards, along with its intent to incorporate nonclinical factors unrelated to product value, such as manufacturing costs, threaten to artificially suppress negotiated prices below fair value. “Many are concerned about the lack of scientific clarity and rigor in the agency’s process as currently known,” said author John M. O’Brien, PharmD, MPH, “as well as the effects of implementation on patient access and the continued development of new treatments, especially in oncology and rare diseases.”

The authors noted significant challenges with specific provisions of the law and CMS's implementation guidance that they fear will lead the agency to establish initial offers and maximum fair prices that do not reflect the clinical benefit and value of selected drugs. “Indeed,” said O’Brien, “neither the CMS guidance nor statements from agency officials explains whether the government’s goal is to lower drug prices, reduce patient out-of-pocket costs, or get more value for the government’s money.” Additionally, according to the authors, government price setting through the Drug Price Negotiation Program has many unintended consequences, most of which are bad for patients, for science, and for the development of innovation. They offer considerations for CMS, including leveraging the expertise of the HEOR community, gaining expertise in methods, and creating two-way communications about the evidence that CMS will value.

Importantly, say O’Brien and Hansen, “the challenges and opportunities of IRA implementation create a watershed moment for HEOR scientists—especially those working in or with drug developers—to become more active in health policy.” They see the following opportunities to do so:

  1. Engage CMS and other government agencies responsible for implementing and evaluating the IRA
  2. Advocate for evidence generation
  3. Use ISPOR resources and participate in initiatives

Taken together, these articles emphasize the critical need for further transparent dialogue and robust research leveraging proven health economics methodologies to properly inform CMS’s product selection, comparative effectiveness estimations, and price negotiation. As CMS moves forward, establishing clear, reproducible processes and two-way communication about the specific evidence required are essential so manufacturers and the broader research community can provide meaningful responses.  

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ABOUT ISPOR
ISPOR—The Professional Society for Health Economics and Outcomes Research
(HEOR), is an international, multistakeholder, nonprofit dedicated to advancing HEOR excellence to improve decision making for health globally. The Society is the leading source for scientific conferences, peer-reviewed and MEDLINE®-indexed publications, good practices guidance, education, collaboration, and tools/resources in the field.
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ABOUT VALUE IN HEALTH
Value in Health (ISSN 1098-3015) is an international, indexed journal that publishes original research and health policy articles that advance the field of health economics and outcomes research to help healthcare leaders make evidence-based decisions. The journal’s 2022 impact factor score is 4.5 and its 5-year impact factor score is 6.2. Value in Health is ranked 8th of 87 journals in health policy and services, 21st of 105 journals in healthcare sciences and services, and 69th of 380 journals in economics. Value in Health is a monthly publication that circulates to more than 10,000 readers around the world.
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