Modeling the Impact of Potential Drug Pricing Reforms

The 2022 IRA included provisions to reduce both federal and private spending on drugs. One key provision enables the federal government to negotiate prices with drug companies for some high-cost drugs covered under Medicare Parts B and D. The client sought our expertise and insight to better understand which of the drugs in its portfolio might be eligible for negotiation.

We leveraged the 2022 Centers for Medicare and Medicaid Services (CMS) Drug Pricing Dashboard to identify drugs that may be eligible for future Medicare drug price negotiation, as outlined in the IRA text and subsequent CMS guidance.
We used key criteria, such as those listed below, to assess the likelihood that each drug identified would be selected for—or excluded from—pricing negotiations:

• Total spending on drug in 2022
• Single- vs. multi-source drug
• Date of FDA approval
• Orphan drug status
• Likely market entry of generic/biosimilar

We mapped the list of drugs potentially eligible for negotiation to the client’s portfolio and assessed the portfolio’s potential per-year exposure according to the Medicare drug pricing negotiation provision.

Our work provided the client with key insights to anticipate the potential impact of IRA Medicare negotiation. The client team used our results to understand its portfolio exposure and adjust budget projections accordingly.

Externally, the client team has used our results in follow-up advocacy conversations with policymakers to discuss the future of Medicare negotiation and the impacts for healthcare stakeholders.