Plain Language Summary

In 2022, the United States enacted the Inflation Reduction Act, a landmark law that, for the first time, allowed Medicare—the federal health insurance program primarily serving older adults—to directly negotiate prices for certain expensive prescription drugs. Previously, a legal provision prevented Medicare from negotiating drug prices directly, leaving that process to private insurance companies and pharmacy benefit managers. This new authority marked a significant shift in how drug pricing is handled in the United States.

As part of this process, the Centers for Medicare and Medicaid Services, the federal agency overseeing Medicare, published explanation documents for the first 10 drugs selected for negotiation. These documents cited research used to inform pricing decisions, including real-world evidence. Real-world evidence refers to clinical information gathered outside of controlled research trials, drawn from sources such as insurance claims, electronic health records, and patient registries. Unlike traditional clinical trials, which use tightly controlled conditions and select patient populations, real-world evidence reflects how treatments perform across diverse patients in everyday healthcare settings.

This study analyzed all 1822 unique references cited across the 10 explanation documents to understand how real-world evidence was used. Researchers found that just over one quarter of all cited studies (27.6%) qualified as real-world evidence, and that real-world evidence was cited for all 10 drugs. However, its use varied widely, ranging from 13.8% for one drug (Farxiga) to 41.5% for another (Xarelto). The most common data source was insurance claims and administrative databases, accounting for nearly half of all real-world evidence studies. Most studies used cohort or longitudinal designs, meaning they followed groups of patients over time.

A critical finding was that, despite citing real-world evidence across all 10 drugs, the explanation documents did not clarify how this evidence influenced final negotiated prices or how its quality was evaluated. This lack of transparency makes it difficult for patients, policy makers, and researchers to assess whether negotiated prices truly reflect the real-world value of these medications.

The study recommends that the Centers for Medicare and Medicaid Services establish clearer, more consistent standards for evaluating real-world evidence, improve documentation practices, and encourage evidence submissions from independent researchers and patient advocacy groups—not just drug manufacturers. International models, such as the United Kingdom's National Institute for Health and Care Excellence, demonstrate that transparent, rigorous frameworks for incorporating real-world evidence into drug pricing decisions are achievable. Adopting similar practices in the United States could strengthen public trust in the negotiation process and ensure that drug prices more accurately reflect the true benefit these medications provide to patients.

^{Note: This content was created with assistance from artificial intelligence (AI) and has been reviewed and edited by ISPOR staff. For more information or for inquiries on ISPOR’s AI policy, click here or contact us at info@ispor.org.}