The potential impact of the Inflation Reduction Act’s efforts to reign in prescription drug prices 


August 11, 2023

Next Wednesday marks the one-year anniversary of passage of the Inflation Reduction Act, an ambitious legislative package that will boost clean energy, lower prescription drug costs, and increase tax fairness by giving the IRS more resources to pursue wealthy tax cheats. 

Under the new law, seniors, people with disabilities, and their families will save millions of dollars on the cost of prescription drugs. Reforms included in the IRA include allowing Medicare to negotiate lower drug costs, capping the cost of most insulin products at $35 a month for Medicare participants, creating the first-ever out-of-pocket cost cap on Part D medicines, making recommended vaccines free for Medicare beneficiaries, and requiring prescription drug companies to pay rebates to Medicare if they raise their prices faster than inflation. Some parts of the IRA already have been implemented; other parts will be phased in in the years to come. 

Already, millions of Americans with diabetes on Medicare are saving money on insulin, which, in most cases, was capped at $35 beginning this year. And by September 1, the Centers for Medicare and Medicaid Services (CMS) will announce the selection of 10 prescription drugs whose prices will be negotiated between the federal government and pharmaceutical companies. These negotiations will culminate in the publication of maximum fair prices on September 1, 2024, and those prices will take effect in 2026. Many more drugs will be added to the negotiations in subsequent years. 

No one knows for certain which ten drugs will be selected for this first round of negotiations. But in a groundbreaking report released in June, the health care advocacy group Protect Our Care took its best shot at guessing. 

The group’s report profiled five expensive drugs it said likely would be eligible to be among those included for price negotiations. The five drugs are AbbVie’s Imbruvica and Pfizer’s Ibrance, both of which are used to treat cancer; Amgen’s Enbrel, used to treat autoimmune diseases such as rheumatoid arthritis; Johnson & Johnson’s Xarelto, used to treat blood clots; and Merck’s Januvia, used to treat diabetes. 

“Together, the Medicare program incurred total spending of $16.69 billion in 2021 alone for these five drugs,” the Protect Our Care report states. “They cost the seniors who take them thousands of dollars per year in out-of-pocket costs. Cancer drugs Imbruvia and Ibance cost most Medicare patients an average of $7,118 and $6,459 in out-of-pocket costs, respectively. Diabetes drug Januvia and blood clot treatment Xarelto cost most Medicare patients an average of more than $1,300 per year in out-of-pocket costs, and those patients are likely to have three or four chronic conditions that add to their out-of-pocket medical expenses.” 

Since 2010, the report notes, Medicare has spent $53.4 billion on three of these drugs alone – Januvia, Enbrel, and Ibrance. 

Change will not come without a fight. Bills to repeal parts or all of the Inflation Reduction Act have been filed in both the House and Senate. And pharmaceutical companies, their lobby group PhRMA, and the U.S. Chamber of Commerce are suing the federal government to prevent the Medicare Drug Price Negotiation Program from going forward. “They want to continue to be able to charge what they want,” the report states. 

Still, health care advocates say negotiating prescription drug prices represents an historic and much-needed step not just in reducing drug costs across the board, but also in addressing inequities that are based on race and ethnicity, gender, sexual orientation, and gender identity. 

Last month, the Center for American Progress released a research paper that examines a group of drugs that could be up for negotiation, the conditions (often chronic) they treat, and who stands to benefit the most from lowered costs. 

“Many of the drugs eligible for the first round of negotiation treat chronic conditions that frequently affect women, Black and Latino people, LGBTQI+ people, and disabled people—many of the same groups that, according to a recent HHS report, have had trouble affording their medication, often rationing drugs and delaying filling prescriptions,” the research paper found. “In many cases, these inequities in medication access are related to the social determinants of health, discrimination, and stress.” 

The paper states that many of the drugs likely to be up for negotiation treat conditions that Black older adults are more likely to have. “Black Americans have blood clots, Type 2 diabetes, prostate cancer, overactive bladder, asthma, schizophrenia, irritable bowel syndrome, and chronic heart failure at higher rates than white Americans,” the CAP paper found. “Consequently, many Black Medicare enrollees are treating one or more chronic conditions: 45 percent of Black Medicare enrollees have diabetes, nearly 1 in 5 are facing heart failure, and 7 percent have asthma.”

In a similar vein, the CAP paper found that Latino Medicare enrollees are also more likely to experience diseases treated by drugs that could be eligible for price negotiation. “For example, in 2020, Hispanic adults were 60 percent more likely to have a diabetes diagnosis than non-Hispanic white adults, with 47 percent of Hispanic Medicare enrollees having diabetes,” the paper states. “Overactive bladder and schizophrenia diagnoses are also more common among Hispanic populations compared with non-Hispanic white populations, and Latino men are more likely to be diagnosed with a more advanced form of prostate cancer.” 

Women are helped by many of the drugs likely to be negotiated.     

“For example, women are more likely to have breast cancer, overactive bladder, some autoimmune disorders, and irritable bowel syndrome compared with men,” the CAP paper found. “In fact, in 2021, 8 percent of female Medicare fee-for-service enrollees had breast cancer—an increase of 3 percentage points over the previous decade. Pregnancy and hormone-related conditions and medications are also important risk factors for blood clots: For example, pregnancyestrogen-based contraception, and hormone replacement therapy all increase the risk of blood clots.” 

Finally, LGBTQ populations that already face substantial health disparities also will find relief. “LGBTQ individuals have higher rates of substance use and smoking than their heterosexual counterparts, making drugs that treat asthma, blood clots, and chronic obstructive pulmonary disease particularly important,” the paper states. “LGBTQ adults are also at higher risk of obesity, schizophrenia, cardiovascular diseases, diabetes, and some cancers.” 

CAP’s conclusion: 

“Medicare drug price negotiation will help Black and Latino people, women, LGBTQI+ people, disabled people, and others who often have trouble affording medications. Significant potential savings that accompany Medicare negotiations enabled by the Inflation Reduction Act will compound as more drugs are subject to negotiation each year. Medicare enrollees can expect improved access to and affordability of prescription drugs for years to come.” 

And Protect Our Care adds that the negotiated drug prices will, at long last, put American consumers on a more equal footing with pharmaceutical companies, who have long endeavored to control the pricing market. 

“Medicare will finally be able to negotiate lower drug prices on behalf of seniors and taxpayers, putting in place a long-needed check on unconstrained drug company greed,” the group said in its report. “With Medicare negotiation for prescription drug prices, the era of Big Pharma being in the driver’s seat is coming to an end.” 

Inflation Reduction Act
Prescription drugs