Key Points on Centers for Medicare & Medicaid (CMS) and Inflation Reduction Act (IRA) Guidance
Contributed by:
Shahnaz Khan, MPH
Vice President, Value & Access
RTI Health Solutions
The Inflation Reduction Act (IRA) was signed into law in 2022 and includes the Drug Price Negotiation (DPN) program, which will allow Medicare to directly negotiate - for the first time - pricing for certain drugs. The Maximum Fair Price (MFP) negotiations include certain high-expenditure, single-source drugs or biologic products with no generic or biosimilar competition.
How the Center for Medicare & Medicaid Services (CMS) negotiations might affect research and development strategy for some products going forward must be baked into development and research plans. Pharmaceutical and biologic product developers will need to have a thorough understanding of the process or work with a partner who does.
The top 50 drugs with the highest total expenditures for the 12-month period beginning June 2022 were negotiation-eligible. From these, the first 10 drugs selected for the DPN Program were selected solely based on total Medicare spend.
Round 1 price negotiations will be completed in 2024, and the negotiated MFPs become effective 2 years later in 2026. The number of drugs selected for price negotiation will increase each year.
Certain drugs are currently excluded from selection for price negotiation: orphan drugs approved for only one disease or condition, plasma-derived products, and small biotech drugs. Drugs with total spending under Part D and Part B of less than $200 million are excluded as well.
In articles to follow, we will examine which information generated from manufacturer activities and therapeutic alternatives the CMS will consider during price negotiations. We’ll also explore what is new on the horizon for Round 2 drug negotiations.