Will Rx provisions in the IRA disappoint?

Michael Hiltzik writes for the Los Angeles Times about the prescription drug provisions in the Inflation Reduction Act (“IRA”). He makes the case that they could disappoint Americans. Pharmaceutical companies will fight hard to ensure that the drug price negotiation requirements do not achieve their desired outcomes.

On one hand, as Stat News declared, the drug price negotiation provisions in the IRA are a “crowning healthcare achievement.” And, that’s true. But, frankly, it’s unsettling that these provisions could be a crowning achievement, given that all other wealthy democracies have far more comprehensive negotiation provisions for their entire population in place.

Medicare spends more on prescription drugs than any other purchaser in the US, and Medicare’s costs are only rising. Medicare is responsible for about one in three dollars spent on prescription drugs and about one in five dollars spent on health care. The IRA is not going to bring down those numbers in a meaningful way.

Hiltzik focuses on the fact that drug price negotiation won’t begin for three and a half years and, then, only for 10 drugs. Moreover, only drugs that have been on the market for at least nine years are eligible for price negotiation. All in, the Congressional Budget Office calculates a 1.3 percent reduction in Medicare spending as a result of the drug price negotiation provision.

Hiltzik imagines that the pharmaceutical companies will find ways around even this narrow piece of legislation. I agree. I imagine drug companies will sue if their drugs are chosen to be the ones whose prices are negotiated. And, even if they don’t, prices will still likely be well above what other wealthy countries spend on these same drugs, since the IRA does not give Medicare the tools to drive a hard bargain.

Unlike the Veterans’ Administration, Medicare is not allowed to cut drugs from its list of covered drugs. So, it cannot use the leverage of walking from the table if the negotiated price the drug company agrees to is too high. Part D drug plans can already negotiate drug prices and walk, in some cases, if they’d like. But, insurers offering Part D plans are looking only to maximize their revenues, which is a far cry from wanting to bring down the price of drugs.

Pharmaceutical companies surely will also raise launch prices to more than make up for any cuts in their drug prices. Hiltzik alludes to one new treatment for a rare drug disease with a launch price of a whopping $2.8 million.

This all said, Medicare drug price negotiation provides a much needed opening, a big foot in the door, for lower drug prices in the US. And, that’s a big deal.

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