Medicare Drug Prices Potentially Reduced by 3% Under the Inflation Reduction Act of 2022

Had the inflationary rebates of the Inflation Reduction Act (IRA) of 2022 been applicable between 2018 and 2020, it could have led to a reduction of around 3% in spending by both patients and the federal government, according to a study published in JAMA.

“This study uses annual Medicare Part B spending data to examine the potential savings from the drug pricing reforms in the Inflation Reduction Act of 2022,” explained Alexander Egilman, BA, Program on Regulation, Therapeutics, and Law (PORTAL), Brigham and Women’s Hospital in Boston, Massachusetts, and coauthors.

Prices for drugs increased by a median of 9% from the benchmark quarter to the fourth quarter of 2020. From 2018 to 2020, 75% of drugs experienced at least one quarter in which average sales price growth outpaced inflation. During this time, estimated rebate savings were $3.7 billion, which accounted for 3% of Part B drug spending.

The highest savings were observed among drugs for rare diseases ($3.1 billion), biologics ($3.0 billion), and cancer drugs ($1.5 billion). Rebates play a significant role in reducing the cost of drugs. They offset a higher percentage of spending, especially for drugs that treat endocrine disorders, rare diseases, and small-molecule drugs. From 2018 to 2020, the three drugs with the highest rebates were denosumab ($481 million), rituximab ($374 million), and abatacept ($352 million). Rebates accounted for 10% or $760 million out of $7.3 billion for drugs that treat endocrine disorders, 5% or $3.1 billion out of $63.5 billion for rare disease drugs, and 5% or $733 million out of $13.4 billion for small-molecule drugs.

“The IRA’s inflationary rebates begin in 2022; had they been in effect from 2018 to 2020, spending by patients and the federal government would have been reduced by approximately 3%,” wrote the study authors. “Approximately two-thirds of the eligible top-selling drugs in Medicare Part B would have been subject to inflationary rebates each year, similar to a previous study finding that prices outpaced inflation for 16 of the 25 highest-selling Part B drugs in 2020,” they added.

Reference

Egilman AC, Kesselheim AS, Rome BN. Estimated Medicare Part B savings from inflationary rebates. JAMA. 2023;329(1):89-92. doi:10.1001/jama.2022.20189