Biden Urges Expansion of IRA’s Drug Price Negotiation Program
TL/DR –
The Biden administration has proposed an expansion to the Inflation Reduction Act’s Drug Price Negotiation Program to increase the number of drugs the program can negotiate prices for from 20 to 50 annually. This expansion includes an increase in rebates that pharmaceutical manufacturers must pay if their drug price hikes outpace inflation, and the expansion of the $2,000 cap on out-of-pocket spending for prescription drugs to all private insurance providers. However, some critics argue that the proposals could disincentivize biomedical innovation and are a premature expansion of a program that has not yet fully been implemented.
Administration Moves to Lower Drug Prices and Healthcare Costs
The White House in Washington, DC/iStock, lucky-photographer
Before the State of the Union address, the Biden administration unveiled an expanded Drug Price Negotiation Program under the Inflation Reduction Act (IRA), aiming to lower drug prices for U.S consumers. The annual negotiation cap of drugs will increase from 20 to 50, targeting medications essential for seniors.
Rebates that pharmaceutical manufacturers pay when drug price hikes exceed inflation are to be expanded. Biden has requested that Congress necessitates these fees for drug sales to Medicare. The $2,000 out-of-pocket spending cap for prescription drugs will also be expanded, impacting Medicare beneficiaries by 2025.
Biden seeks to extend this spending limit to all private insurance providers, providing financial security for all Americans. The administration plans to launch a new program capping Medicare Part D cost-sharing at $2 for certain generic drugs. A list of these medicines will be released by the Department of Health and Human Services.
Biden’s proposals follow a legislative bill recently introduced by Democratic lawmakers to expand the IRA and cover all people with private insurance. This would affect roughly 164 million workers and their families who receive medical coverage through their employers.
The IRA, signed into law by Biden in August 2022, aims to save the federal government around $25 billion in annual drug costs by 2031. A key feature of the IRA is the Medicare Drug Price Negotiation Program, which negotiates the prices for widely prescribed medicines, set to start in 2026.
John Stanford, the Executive Director of Incubate, expressed disappointment that the administration is expanding the IRA. He argued that it’s too soon to expand a program that hasn’t yet been implemented. The drug price negotiations started on Feb. 1, 2024, when CMS commenced to send its initial maximum fair proposals to pharmaceutical companies. All 10 manufacturers have submitted their counteroffers, with negotiations ending on Aug. 1, 2024.
No Patient Left Behind’s executive director, Peter Rubin, suggests that instead of expanding price controls, the president and Congress should focus on fixing the IRA’s small molecule ‘pill penalty’. This disparity in negotiation, criticized by some industry stakeholders and lawmakers, allegedly hampers investment and innovation.
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