Richard H. Hughes, IV, Member of the Firm in the Health Care & Life Sciences practice, in the firm’s Washington, DC, office, co-authored an article in Health Affairs, titled “The IRA: Reducing Inflation or Threatening Patient Access?”
Following is an excerpt:
The Biden administration touts the Inflation Reduction Act (IRA) as lowering prescription drug costs and many of its supporters view having Medicare “negotiate” drug prices as emulating policies in Europe. The IRA does lower Medicare beneficiaries’ costs by capping their out-of-pocket spending on retail drugs in the Part D program; however, the IRA’s Medicare Drug Price Negotiation (MDPN) program is far more coercive than any European country system and unnecessarily threatens access to medicines for millions of Medicare and Medicaid beneficiaries.
Rather than a “negotiation,” the IRA’s MDPN program creates a government price-setting scheme under which the Centers for Medicare and Medicaid (CMS) will inform biopharmaceutical manufacturers of Medicare’s Maximum Fair Price (MFP). Should a company choose not to participate in the MFP-setting process, it will be forced to either pay an excise tax that could conceivably exceed its entire company revenue or remove all of its products from the Medicare program and all state Medicaid programs. The prospect of such a dire scenario is not inconceivable as CMS recently rejected counteroffers from all companies whose drugs were selected for the first round of “negotiations.”
Collectively, the nine biopharmaceutical companies that are primary manufacturers of the drugs selected for the first round of the program produce medicines for 28 million patients in Medicare and Medicaid each year (See exhibit 1). In 2021, eight million Medicare and Medicaid patients received one of the ten drugs selected and another 20 million were treated with other products made by the nine biopharmaceutical manufacturers. By government policy design, the vast majority of Medicare and Medicaid enrollees do not have additional health insurance that would pay for these medicines if Medicare and Medicaid did not.
