The Inflation Reduction Act and Negotiated Drug Prices
The Inflation Reduction Act authorized the federal government to negotiate lower prices for certain kinds of medications, enabling the United States to join the ranks of dozens of countries whose governments routinely negotiate costs with pharmaceutical companies. The program will aim to negotiate lower prices for up to 60 drugs covered under Medicare, with an aim towards targeting the ones that account for the highest levels of spending and where no alternatives are available.
On Tuesday, the Biden Administration announced the first 10 drugs whose prices will be negotiated: diabetes drugs Jardiance, Januvia, Fiasp and NovoLog; chronic kidney disease drug Farxiga; stroke and blood clot medications Eliquis and Xarelto; heart failure medication Entresto for heart failure; blood cancer treatment Imbruvica, Crohn’s disease treatment Stelara and arthritis medication Enbrel.
The new prices will go into effect in 2026, but the impact of at least the first 10 drugs may not be major. A research report from Jefferies finds that many of the drugs selected will already have generics available by the end of the decade, which includes both small molecules and some of the biologicals. Stelara and Xalreto, both have generics expected to enter the market in 2025, which would mean price negotiations for them might not happen. The Jefferies researchers also note that the negotiation provisions of the Inflation Reduction Act are currently the subject of lawsuits, which may delay or prevent the implementation of any lower drug costs. (Several Trump Administration efforts to lower prescription drug costs were blocked by federal courts, for example.) Overall, the report suggests there will be an impact of less than $19 billion total from 2026 through the end of the decade. A drop in the bucket compared to the over $335 billion Americans spent on prescription drugs every year.
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