Inflation Reduction Act’s Medicare Drug Price Negotiation Program: a threat to patient access?

A new Health Affairs Forefront article titled, ‘The IRA: Reducing Inflation Or Threatening Patient Access?’ by Richard Hughes IV (Epstein Becker & Green, P.C.) and Richard Kane (PhRMA), delves into the implications of the Inflation Reduction Act‘s (IRA) Medicare Drug Price Negotiation (MDPN) program, raising significant concerns about its impact on patient access to essential medications.

While the Biden administration and its supporters assert that the IRA will lower Medicare beneficiaries’ costs, the article contends that the methods employed by the MDPN program may threaten patient access, marking a stark departure from European drug pricing models.

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Coercive nature of the MDPN program

The core criticism revolves around the coercive approach of the IRA. Unlike European countries, where drug prices are negotiated through systematic assessments and incremental processes, the IRA’s MDPN program imposes a government-set maximum fair price (MFP). Manufacturers must either accept this price or face punitive measures, such as excise tax or the removal of product from Medicare and Medicaid. The authors note that, “the prospect of such a dire scenario is not inconceivable as the Centers for Medicare and Medicaid Services (CMS) recently rejected counter-offers from all companies whose drugs were selected for the first round of negotiations.” This approach could severely disrupt access for millions of beneficiaries who rely on these medications.

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Shift from market-based mechanisms

The authors describe the IRA’s policy as a significant departure from previous US practices, which traditionally relied on market-based mechanisms. Historically, US drug prices under Medicare and Medicaid were determined through negotiations between private insurers and manufacturers, or based on commercial market prices. This market-driven approach allowed for a balance between cost control and access to innovative treatments.

In contrast, the MDPN program introduces a system where the CMS sets drug prices based on its assessment of a drug’s clinical benefit and cost to Medicare, with limited input from manufacturers. This shift to government-determined pricing is seen as more aggressive than the pricing systems in other countries, where disputes over drug prices do not result in such drastic measures as removing a company’s product line from public health programs. The authors state,

“The IRA’s MDPN program not only marks a shift in US policy toward government price-setting but also portends a US government much more willing to deny patients access to innovative treatments.”

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Potential fallout for manufacturers and patients

The authors highlight the potential fallout from this policy. If manufacturers withdraw their products from Medicare and Medicaid, millions of patients could lose access to necessary treatments. This scenario is depicted as an untenable option for both manufacturers, who would face financial devastation from the excise tax, and patients, who would be left without critical medications. They assert,

“The only financially viable alternative to accepting the MFP for a manufacturer will likely be to remove all of its products from the Medicare and Medicaid programs.”

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Comparison with European models

The article concludes by comparing the US approach under the IRA with those of Germany, France, and the UK. In these countries, while drug prices are also set by the government, the mechanisms allow for negotiation, reassessment, and arbitration without the threat of removing a manufacturer’s drugs from the public health system. This more measured approach helps ensure patient access is maintained while still controlling costs. The authors emphasize that,

“No government, in any country, threatens access for millions of patients in its public health insurance program by removing the biopharmaceutical manufacturer’s entire portfolio of medicines in response to a dispute over the government valuation for one medicine.”

Overall, the authors argue that the IRA’s MDPN program, while intended to reduce drug costs, may have severe unintended consequences on patient access to medicines. They suggest that the policy’s coercive tactics could undermine the very goal it seeks to achieve and call for a more balanced approach that ensures both cost control and patient access to essential medications.