Presentation (CTI)

OBJECTIVES: The Inflation Reduction Act (IRA) includes a special rule deferring price negotiation for biologics facing imminent biosimilar competition. However, it is unclear whether this provision sufficiently maximizes Medicare savings while preserving biosimilar market incentives. In this study we modeled alternative IRA implementation strategies to balance short-term savings and long-term market sustainability, using ustekinumab as a case study.
METHODS: We modeled Medicare savings across three hypothetical scenarios. Scenario 1 used 2017-2024 price data for 10 reference biologics and 30 associated biosimilars to project savings for ustekinumab following biosimilar entry. Scenario 2 estimated first-year savings based on the IRA’s negotiated maximum fair price for ustekinumab, assuming no biosimilar introduction. Scenario 3 modeled total savings if ustekinumab were excluded from negotiation due to near-term biosimilar competition and replaced by palbociclib, a high-spend single-sourced small molecule indicated for metastatic breast cancer and eligible for negotiation.
RESULTS: Based on pricing trends for reference biologics and biosimilars, market-weighted prices declined to 40.3% of pre-entry levels within five years of a biosimilar launch, translating to an estimated $2.3 billion in annual Medicare savings for ustekinumab (Scenario 1). IRA negotiation for ustekinumab (Scenario 2) was estimated to generate greater first-year savings ($1.4 billion) but lower savings by year 5. The modified scenario (Scenario 3), which combined negotiated discounts for palbociclib with biosimilar competition for ustekinumab, was estimated to yield the largest annual savings by year five ($3.2-$3.5 billion).
CONCLUSIONS: Negotiating biologics with near-term biosimilar competition may generate short-term savings but could undermine larger long-term savings achievable through market competition. Refining drug-selection criteria to align negotiation with products lacking imminent biosimilar entry would better synchronize negotiation and market forces. Calibrating the IRA to preserve biosimilar incentives while targeting negotiation towards single-sourced therapies is critical to optimize Medicare savings and ensure a resilient U.S. biosimilar market.