The Inflation Reduction Act Exclusion Effect: An Analysis of Inflation Reduction Act Minimum-Discount Negotiation Rules

Author(s)

Mock G, Frois C, Oden D
Trinity Life Sciences, New York, NY, USA

OBJECTIVES:

The 2022 Inflation Reduction Act (IRA) was introduced to contain Medicare spending. A key feature of the Act was the introduction of mandated price discount/negotiations of at least 25% for selected therapies that have been on the market at least 9-13 years. However, the IRA includes several exemptions excluding therapies from these discounts/negotiations e.g., therapies with less than $200M in annual Medicare spending, biosimilar or generic entrants available, only a single orphan indication, and those that are vaccines or plasma-derived.

The present research seeks to assess how much these exemptions may impact the law’s ability to contain Medicare spending.

METHODS:

2020 Medicare expenditure data were examined to assess the fraction of eligible therapies and drug spend, that exempt therapies represent, and in particular exempt therapies without biosimilar or generic competition (since cost containment opportunities should already be captured through the price competition that generics and biosimilars introduce). All therapies that did not meet the IRA $200M spending threshold were removed. Next, the remaining therapies were cross checked for the remaining exemption classifications. The research also qualitatively considered indirect effects of the IRA on exempt therapies (i.e., impact of discounted competitors).

RESULTS:

228 therapies exceeded the IRA annual spending threshold. Of these, 33% (N=77) would be exempt from negotiation. 67 exempt therapies had a biosimilar or generic competitor, but there were also several vaccines (N=5) and plasma-derived therapies (N=5). Medicare spent $30.7B on exempt therapies in 2020, 4% of total spending.

Furthermore, we found that exemptions for therapies without existing biosimilar/generic competition (i.e., vaccines and plasma derived therapies) only accounted for 0.5% ($4.5B) of 2020 Medicare spending.

CONCLUSIONS:

Exemptions to the IRA minimum discounts/negotiations despite representing ~1/3 of high spend drugs, can be expected to have a minimal impact on the IRA’s cost containment goals.

Conference/Value in Health Info

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

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

Code

HPR49

Topic

Health Policy & Regulatory

Topic Subcategory

Insurance Systems & National Health Care, Pricing Policy & Schemes, Public Spending & National Health Expenditures

Disease

Biologics & Biosimilars, Generics, Rare & Orphan Diseases, Vaccines

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