Perhaps the biggest shift Pharma has seen in the last 2 years is the Inflation Reduction Act (IRA) of 2022. While there are several elements to this bill, here are 3 that have a very important and immediate impact.
Medicare Drug Price Negotiation
The IRA grants Medicare the authority to negotiate prices directly with pharmaceutical companies for certain high-cost drugs. This is a major shift, as previously, Medicare was prohibited from negotiating drug prices. The team at D2 is hearing that some of these discounts might approach as much as 80%.
Pharmaceutical companies are concerned that this could lead to lower prices for some of their top-selling drugs, reducing their revenue. The act targets drugs that are among the most expensive for Medicare and have been on the market for a long time without competition.
Caps on Out-of-Pocket Costs
Starting in 2025, the IRA will introduce a cap on out-of-pocket costs for Medicare Part D beneficiaries at $2,000 annually. This cap is designed to protect consumers from high costs but could pressure pharmaceutical companies to adjust pricing strategies to compensate for potential revenue losses.
Inflationary Rebates
The IRA requires drug manufacturers to pay rebates to Medicare if they raise the prices of their drugs faster than the rate of inflation. This provision discourages companies from implementing steep price increases, which could curb profit margins. Companies may need to reconsider their pricing strategies to avoid triggering these rebates.
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