The Inflation Reduction Act (IRA), signed into law on August 16, offered historic investments in energy security and climate change. However, the legislation also raised concerns among the biopharmaceutical industry as it included drug price controls on the medications Medicare spends the most money on annually.
In a recent webinar, Joan Koerber-Walker, President and CEO of the Arizona Bioindustry Association (AZBio), walked through the provisions of the legislation from both the patient and health innovation points of view.
“We are an industry that exists to make life better for patients,” she said – and none of it makes sense if patients cannot afford or access life-changing or life-saving treatments, she added.
However, in order to move in the right direction with innovation and policy, patients must come first, AZBio’s Koerber-Walker noted.
Of note, the Inflation Reduction Act (IRA) expands Medicare benefits for seniors, including:
- providing free vaccines,
- insulin plans that would cost around $35 a month (both going into effect in 2023), and,
- a reduction in the out-of-pocket limit from $4,000 in 2024 to $2,000 in 2025.
The IRA requires the Centers for Medicare and Medicaid Services (CMS) to list the top 100 Medicare-covered prescription drugs by price; starting in 2023, the prices of the top 10 will be set by the government. In 2026, the new prices will begin to take effect. In 2027, the FDA would choose an additional 15 Part D pharmaceuticals, and in 2028, an additional 15 Part B and Part D drugs. The agency would choose 20 more Part D and Part B medications for price controls in 2029 and beyond.
Drug makers ‘do not have a choice – except to exit the market.’
For drug manufacturers that don’t “negotiate” or follow the “maximum fair price” rules, “an excise tax will be levied.” The tax will start at 65% of the drug sales in the United States, which will increase by 10% per quarter, up to 95%.
By not complying with the “maximum fair price” rules or refusing to pay the excise tax, drug makers will be forced to withdraw their products and no longer offer them to Medicare/Medicaid beneficiaries.
“So, the short answer is – you do not have a choice – except to exit the market,” Koerber-Walker concluded.
According to the AZBio CEO, the Inflation Reduction Act (IRA) “is doing really important things for patients, especially the seniors and disadvantaged.” Koerber-Walker emphasized the legislation will help some small businesses, particularly those that rely on IRA coverage in the marketplace.
However, in the long run, she added, this will have “long-term, unintended consequences” for patients and biotech innovation.