Implications of Inflation Reduction Act (IRA) on Budget Impact and Cost-Effectiveness Modeling


Aggarwal S1, Topaloglu J2, Kumar S3, Bela A4, Topaloglu O1
1NOVEL Health Strategies, Bethesda, MD, USA, 2Institute of Global Policy, Washington DC, DC, USA, 3NOVEL HEALTH STRATEGIES, COLUMBIA, MD, USA, 4NOVEL Health Strategies, Chevy Chase, MD, USA


The objective of this analysis was to review all new changes due to the IRA and develop implications for budget impact model (BIM) and cost-effectiveness analysis (CEA) for US payers.


The new pricing, access and coverage changes impacting the pharmaceutical products were reviewed using the bill for IRA (H. R. 5376), 2022-2023 policy publications, reports by Congressional Budget Office and Government Accountability Office, and the latest Centers for Medicare & Medicaid Services (CMS) guidelines for implementation of the new act. Primary discussions with US private payers and ex-CMS policy experts were conducted to understand key issues for medical products. Sample US BIM and CEA were adjusted to illustrate the type of changes and their impact on model results.


The IRA has introduced major changes for product pricing, co-pay, coverage and uptake. For pricing, two model adjustments are incorporating price negotiation for top selling Medicare drugs and limiting drug price inflation to CPI for no penalties. For Part D reimbursed drugs, the patient co-pay will be capped to $2000 (effective 2025), which could lead to higher costs for payers and eventually more price negotiations (including non-top selling Medicare drugs). For uptake, an additional population will be eligible based on expanded eligibility for full low income subsidy (LIS) benefits to individuals with incomes between 135-150% of federal poverty limit. Experts expect relatively higher launch prices for new drugs to adjust for potential negotiations in the future. Experts suggest a wide range of complexities and challenges (policy, legal and operational) in implementing the first round of price negotiations. Modeled scenarios show potential outcomes for impacted drugs (higher launch prices, lower price with Medicare and divergence in pricing in public vs private plans).


BIM and CEA in the US will need to be adjusted based on the new changes introduced by the IRA.

Conference/Value in Health Info

2023-05, ISPOR 2023, Boston, MA, USA

Value in Health, Volume 26, Issue 6, S2 (June 2023)




Economic Evaluation

Topic Subcategory

Budget Impact Analysis, Cost-comparison, Effectiveness, Utility, Benefit Analysis



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