One year into the passing of the IRA: Market access implications

By Ankush Patel, MD, Senior Strategic Planner, and Haley Willett, PharmD, Associate Director, Strategic Planning, Mosaic

On August 16, 2022, the Inflation Reduction Act (IRA) was signed into law. It included policy changes related to healthcare, climate change, and taxation.1 Specific to healthcare, the IRA includes several drug-pricing provisions aimed at reducing drug spending and increasing access to pharmaceutical drugs in the US.2 The three key drug pricing provisions are2:

  • Requirement that the federal government negotiates prices for certain Medicare-covered, single-source drugs
  • Requirement that drug manufacturers pay rebates to Medicare if drug prices of single-source drugs in Part B or Part D rise faster than the rate of inflation
  • Medicare Part D benefit redesign, which limits patient out-of-pocket spending on select prescription drugs

One year into the passing of the IRA, several questions remain on the unintended consequences of these drug-pricing provisions. Below are three of the key pricing provisions of the IRA, and implications for market access stakeholders.

1. Requirement for federal government price negotiation for some Part B and Part D Medicare drugs

A previous “non-interference” clause established under the Medicare program prohibited Medicare interference during drug price negotiations.2 The IRA will now require that Medicare negotiates pricing with drug manufacturers for select Part B and Part D drugs under the Drug Price Negotiation Program.2,3 An upper limit, or “maximum fair price” will be established for each drug’s negotiated price, all of which must be covered under all Part D plans.2,3 Provider payment will be 106% of the maximum fair price for Part B drugs with a negotiated price.3

Drugs subject to negotiation will be chosen from the top 50 drugs with the highest total Part B spending and the top 50 drugs with the highest total Part D spending.2,3


  • Part B and Part D Drugs Included in Negotiation2,3
  • Single-source brand-name drugs or biologics without generic or biosimilar competitors
  • Part B and Part D Drugs Excluded from Negotiation2,3
  • Drugs with an available generic or biosimilar
  • Small-molecule drugs and biological products less than seven or 11 years from FDA approval or licensure, respectively
  • Small biotech drugs*
  • Drugs with an orphan designation for their only FDA-approved indication
  • Plasma-derived products

*Exclusion only effective until 2029; defined as drugs with ≤1% of total Part D spend in 2021 and ≥80% of total Part D spend for all drugs by that manufacturer with Coverage Gap Discount Program in effect in 2021.

Biologics may be granted delays in price negotiation selection if a biosimilar is expected or likely to enter the market within two years of the drug list publication date.4 The biosimilar manufacturer must submit a request in advance of the drug list being published in order to be considered for a delay.4

The first 10 Part D drugs selected for negotiation were published on August 29, 2023, with their negotiated maximum fair prices to be published by September 1, 2024.2 The negotiated prices for these first 10 selected Part D drugs will go into effect January 1, 2026.2

  • As part of the negotiating process, CMS will meet with drug manufacturers of the first 10 Part D drugs in the fall 2023 and then send an initial offer for each drug’s maximum price by February 1, 2024.4
  • Companies will have the opportunity to accept or submit a counteroffer within 30 days and have up to three meetings with CMS to negotiate the price from February 1 to August 1, 2024, ahead of January 1, 2026.4

Additional drugs will be selected for negotiation in the following years; up to 15 drugs for 2027, up to 15 for 2028 (including Part B drugs), and up to 20 drugs for each subsequent year.2,3

Payer implications

Lower drug costs are an obvious win for payers, but payers have raised concerns regarding potential consequences around details of the provision, including potential barriers for new biosimilar market entry and delayed access to lower-cost generics and biosimilar drugs if selected drugs are not removed from negotiations in a timely manner once criteria are met. Payers may also experience heightened administrative burden and increased costs due to the current broad definition of a qualifying single-source drug.

Manufacturer implications

This provision directly impacts manufacturer pricing and revenue and the negotiation process will require ongoing manufacturer involvement, including monitoring and data submission to ensure a drug’s value proposition is clear.

In response to lower drug costs through price negotiations, experts have predicted that manufacturers will subsequently raise launch prices of new drugs to account for the shortened lifecycles of new drugs before negotiations will set in; manufacturers will need to consider this in ongoing payer discussions and be prepared to address payer concerns around additional cost implications for non-Medicare plans.

2. Requirement for drug manufacturers to pay rebates to Medicare if drug prices of single-source drugs in Part B or Part D rise faster than inflation

In the past, Medicare has not been involved in limiting the annual price increase for drugs covered under the Medicare Part B or Part D benefit.2 Under the IRA, drug prices will be evaluated based on the manufacturers’ average sales price (ASP) for Part B drugs and average manufacturer price (AMP) for Part D drugs.5,6 October 1, 2022 marked the start of the first 12-month period for which drug companies will be required to pay rebates to Medicare if prices for certain Part D drugs increase faster than the rate of inflation. January 1, 2023 marked the start of the first quarter for certain Part B drugs. CMS will be required to invoice drug companies for Part B and Part D inflation rebates by the second half of 2025. The table below lists the drugs subject to and excluded from the Part B and D drug inflation rebates.7


Drugs subject to inflation rebates

Part B

  • Single-source drugs, biologics and biosimilars

Part D

  • Any drugs and biologics approved by the FDA (including biosimilars)
  • Certain generics*

Drugs excluded froom inflation rebates

Part B

  • Biosimilars that have an ASP less than or equal to reference biologic’s ASP
  • Medicare low-spend drugs (average total allowed charges for drugs or biologics for a year per individual is less than $100)
  • Certain vaccines (Pneumonococcal, hepatitis B, influenza, COVID-19)
  • Medicare low-spend drugs (average total allowed charges for drugs or biologics for a year per individual is less than $100)

Part D

  • Medicare low-spend drugs (average total allowed charges for drugs or biologics for a year per individual is less than $100)

*Only if reference drug is not being marketed, there is no therapeutically equivalent generic available, manufacturer is not “first applicant” during the 180-day marketing exclusivity period, and the manufacturer is not a “first approved applicant” for a competitive generic therapy.

In September 2023, Medicare published its third quarterly list* with 34 Part B drugs flagged for quarterly rebates under the Medicare Prescription Drug Inflation Rebate Program. CMS indicated that people who take these drugs are expected to save between $1 and $618 per average dose between October 1 and December 31, 2023.8

*Prior lists were published in March and June 2023.

Payer implications

The IRA inflation-based rebate provision is likely to limit payers’ ability to negotiate new drug prices with manufacturers based on subsequent real-world evidence since price changes will be based primarily on inflation rates. Drug manufacturers are expected to launch new drugs with higher prices in response to these inflation-based rebates.9 Both Medicare and commercial payers may in turn respond to these higher drug prices by tightening formularies and implementing more stringent utilization management policies.

Manufacturer implications

As payers potentially tighten management of drugs, manufacturers will need to ensure a product’s value proposition is clear to payers, placing increased emphasis on real-world evidence and health economic outcomes to further establish the necessary associations between drug pricing and value.

3. Medicare Part D benefit redesign, which limits patient out-of-pocket spending on select prescription drugs

Under the current Medicare Part D benefit design, patients with a Part D drug benefit only qualify for catastrophic coverage when the amount that they pay out of pocket plus the value of the manufacturer discount on the price of brand-name drugs in the coverage gap phase exceeds a certain threshold amount.2 For 2023 this amount is $7,400 and is projected to be $7,750 for 2024 and $8,100 in 2025.2 Currently, when enrollees exceed the catastrophic threshold they are required to pay 5% of the total drug costs above the threshold until the end of the year unless they qualify for Part D low-income subsidies.10

The IRA changes the Part D benefit design for 2024 by eliminating the 5% beneficiary coinsurance requirement above the catastrophic coverage threshold and caps out-of-pocket (OOP) costs at $3,250 in 2024.10

Starting in 2025, the IRA further lowers the beneficiary OOP threshold to $2,000 and will eliminate the coverage gap phase.10 The Medicare redesign will also increase Part D plan liability from 15% to 60% for brand-name and generic drugs above the OOP spending gap, and drug manufacturers will need to provide a 20% price discount on brand-name drugs.2 The legislation will further require manufacturers to provide a 10% discount on brand-name drugs between the deductible and annual OOP spending cap.2

The OOP (out-of-pocket) spending threshold willbe $7,400 in 2023 and is projected to be $7,750 in 2024 and $8,100 in 2025, including what beneficiaries pay directly out of pocket and the value of the manufacturer discount on brand-name drugs in the coverage gap phase. These amounts translate to out-of-pocket spending of approximately $3,100, $3,250, and $3,400 (based on brand-name drug use only).2

Additional benefits within the Part D redesign include the $35 monthly cap on insulin cost sharing, which took effect on January 1, 2023, for insulin covered under Part D and July 1, 2023 for Part B. Additionally, as of January 1, 2023, adult vaccines are covered under Part D with no OOP expenses.2,11

Payer implications

The new Medicare Part D benefit redesign OOP limit of $2,000 in 2025 and elimination of the coverage gap phase is likely to increase prescription demand for high-cost specialty tier drugs. Part D plans may respond to the increased demand and plan liability by increasing utilization management to midigate the potential for significantly increased payer spend. Plans may also adjust formularies in favor of products with lower list prices vs those with higher list prices, decreasing number of brands on preferred tiers, and potentially increasing drug exclusions.

Manufacturer implications

As payers may seek to increase utilization management due to the benefit redesign, manufacturers will need to anticipate these potential shifts and risks to brand access. The new Part D benefit redesign also puts increased liability on manufacturers during the initial coverage phase and catastrophic coverage phase. The redesign may have a significant impact on brand margins and will be largely driven by the list price of drugs, as higher priced drugs move patients more quickly through the initial coverage phase and into the catastrophic coverage phase where manufacturer liability is now 20%.12

The Part D benefit redesign is likely to create an opportunity for patients to start on drugs which may have been too costly in the past. In response, manufacturers with high-cost therapies now have the opportunity to educate patients and healthcare providers on the benefit redesign and enhance awareness of potential increased access to these therapies.


The implementation of the IRA’s drug pricing provisions are underway and it will be critical to continue monitoring the potential impact these may have now and in future. Most recently, a number of top drug manufacturers have taken a strong stance in court against the requirement that the federal government negotiates prices for certain Medicare-covered, single-source drugs, arguing that it stifles innovation and violates the US constitution by allowing the federal government to dictate drug pricing. What is absolutely certain is that the industry will continue to examine the downstream effects of the IRA beyond lowering drug pricing, with many implications to stakeholders remaining to be seen.

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