The Impact of Medicare Price Negotiations

The Inflation Reduction Act (IRA) passed on August 16th, 2022 brings big changes for the pharmaceutical industry. On August 31st we had a live discussion on the law’s anticipated impact. Here is a summary of our discussion:

Inflation Penalty

The intent of the law is to impose penalties on manufacturers who raise drug prices faster than inflation. Penalties will begin very soon; however, recent Consumer Price Index (CPI) inflation rates allow increases of around 13.5% without any penalties assessed. Manufacturers are anticipated to increase launch prices to make up for lower annual price increases.

Price “Negotiation” Schedule and Limitations

The number of drugs will be limited

Health and Human Services (HHS) will select up to 60 Part D/ Part B drugs for negotiation in the next few years. Selected drugs must meet specific criteria, including time on market and the presence of competition.

What is the “Maximum Fair Price?”

If a drug is selected for negotiation, its price will be reduced by 25%, then 35%, then 60% over a predefined timeline. HHS will try to lower those prices more through further negotiations with the respective drug manufacturers.

Revenue loss

The collection of drugs subjected to this law will lose approximately $10 billion per year. A “double dipping” scenario may occur when these price reductions are combined with typical rebates to Part D Plan sponsors and 340B discounts. A 90% loss of revenue is plausible when this scenario occurs.

Impact on Pharma

The impact of the IRA law on pharma will be measured in the billions of dollars. This loss of revenue will be focused not only on the drugs selected for negotiation by Medicare, but also in the commercial channel, as manufacturers are constrained in raising their list prices.

In case you missed it…

Part of the discussion focused on how to predict if your product may be subject to “negotiation”. If your product could conceivably become subject to HHS negotiations, you will want to be very familiar with different timelines and scenarios. This webinar can help you!

Send us an email to access a recording of this review of the Inflation Reduction Act and how it may impact pharm. 

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    The Impact of Medicare Price Negotiations

    A Live Webinar

    Wednesday, August 31st

    1-2pm EST

    The Pharma Perspective

    Discussion Topics Include:

    How the Inflation Reduction Act (IRA) will affect drug pricing

    Pharma’s potential response

    The impact on field teams

    Hosted by:

    Don Benson

    Managing Partner

    ProFusion LLC


    ProFusion delivers consulting and training in Managed Care & The Business of Medicine. Our customized solutions improve success for your field teams and sales.

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