IRA's inflation-linked rebates would've saved government $3.7B from 2018 to 2020 — JAMA research
Aaron KesselheimA new analysis from Harvard’s Aaron Kesselheim points to the recently signed Inflation Reduction Act as a way that Medicare could’ve saved even more money had it begun earlier.
Published in the Journal of the American Medical Association on Tuesday by Kesselheim and Ben Rome, alongside Alexander Egilman, the analysis pointed out that routine price increases by drugmakers every January are no longer that straightforward thanks to this sweeping law. If the price of a drug increases faster than inflation, drug manufacturers have to reimburse Medicare via rebates starting this year.
Benjamin RomeThe academics continued, saying that if that policy was in effect from 2018-2020, 75% of 93 top-selling drugs would have owed Medicare rebates due to price increases above inflation. In short, Medicare Part B would have saved $3.7 billion, about 3% of its total spending in that timeframe.
Medicate Part B savings for some of these drugs would go into the 9-figure range, the authors estimated. The top 10 drugs that would have been impacted the most by rebates add up to more than $2.1 billion, and would have affected several Big Pharmas. Examples include Merck’s Keytyruda, which would have saved Part B $120 million over three years, and escalating all the way up to Amgen’s Prolia, which would have saved Part B $481 million, or almost 10% of what Part B spent in 2018-2020 on the drug.
Alexander EgilmanThe trio added that there could be additional savings for pharmacy-dispensed drugs reimbursed under Part D of Medicare, although those savings are harder to estimate due to those rebates being confidential. For potential future implications, “The policy could also discourage manufacturers from raising prices each year, which would save money for those with private insurance, although the impact may be blunted in periods of high inflation.”
Indeed, a recent Reuters report found that drugmakers including Pfizer, GlaxoSmithKline, Bristol Myers Squibb, AstraZeneca and Sanofi plan to raise prices of about 350 drugs early this month.
A limitation for Part B savings, however, is that inflationary rebates introduced under the IRA may not apply to Medicare Advantage plans. Those plans covered 48% of Medicare beneficiaries last year, the authors noted.
