How the IRA is more coercive than any European government price setting scheme

Although many supporters of the Inflation Reduction Act (IRA) view having Medicare “negotiate” drug prices as emulating policies in Europe, a recent article in Health Affairs Forefront shows how the IRA’s price setting provisions are more coercive than any European country system and threaten access to medicines for millions of Medicare and Medicaid beneficiaries.

One concerning aspect of the IRA is the penalties that will negatively impact patients. Should a company not participate in the price-setting process, it will be forced to either pay an excise tax that could conceivably exceed its entire company revenue or remove all of its products from coverage under Medicare and Medicaid. That means Americans enrolled in those programs — whether they are taking a medicine selected for price setting or not — would lose access.

As outlined in Health Affairs:

• Collectively, the nine companies that are primary manufacturers of the medicines selected for the first round of price setting manufacture medicines for 28 million patients in Medicare and Medicaid each year.
• In 2021, 8 million Medicare and Medicaid patients received one of the ten medicines selected and another 20 million were treated with other products made by the nine biopharmaceutical manufacturers.
• By government policy design, the vast majority of Medicare and Medicaid enrollees do not have additional health insurance that would pay for these medicines if Medicare and Medicaid did not. 

The Health Affairs article looks at drug pricing policies in Germany, France and the United Kingdom and notes that while other countries use drug price setting policies that are deeply flawed and have severe consequences for patient access, they do not threaten to remove coverage for the biopharmaceutical manufacturer’s entire portfolio of medicines in response to government pricing for one medicine, like the IRA does.

The IRA’s price setting provisions not only mark a shift in U.S. policy toward government price-setting but also portend a U.S. government much more willing to deny patients access to innovative treatments. In just the first year, the U.S. government is willing to risk access to medicines for 28 million Medicare and Medicaid beneficiaries. Even more alarming is that there are some policymakers who want to expand the IRA, putting access at risk for even more Americans. Price setting is the wrong approach. That’s why Congress and the administration need to fix the IRA, putting the focus back on protecting patient access to medicines.

Learn more about how the IRA threatens access to medicines here.