DIA 2023: The Impact of the IRA

Led by Graham Cookson, chief executive of UK’s Office of Health Economics OHE), alongside Dimitrios Kourouklis, OHE’s principal economist, Alex Gee, senior director of pricing and access, Parexel International; and Annie Kennedy, chief of policy, advocacy, and patient engagement for the EveryLife Foundation for Rare Diseases, these individuals participated in the DIA panel, “The Inflation Reduction Act Price Setting: What are the Impacts on Biopharmaceutical Innovation from Different Perspectives?”

DIA session, "The Inflation Reduction Act Price Setting: What are the Impacts on Biopharmaceutical Innovation from Different Perspectives?” June 27, 2023. DIA 2023, Boston. Image Credit: © Nicholas Saraceno.

The goal of this panel was to dive into how the Inflation Reduction Act (IRA) affects market conditions, especially when it comes to developers and patient access to treatments.

As Cookson discusses, starting in 2026, the US Department of Health and Human Services (HHS) will be setting Medicare prices for eligible prescription medicines in Part D; this is will be extended to eligible medicines for Part B by 2028. The IRA introduces an inflation rebate to quarterly Part B and annual Part D price increases above inflation; there will also be changes in stakeholder liability for drug costs—there will be a cap to out-of-pocket spending, it smooths cost sharing, and other benefit changes.

So, which drugs are eligible for selection? It includes the top 50 drugs in Part B and Part D respectively (ranked by program expenditures). Single-source drugs, seven or more years after FDA approval and single-source biologics, 11 or more years after approval are also included. On the other hand, drugs with single orphan designation that are only approved for that particular indication, plasma-derived products, “low spend” Medicare drugs (the total Part B and Part D expenditure is less than $200 million annually), and certain “small biotech drugs” up until 2028 would be ineligible.

While briefly alluded to in previous conference coverage, IRA mentions two sets of factors that HHS ought to consider for determining the maximum fair price (MFP), including manufacturer-specific data and clinical benefit compared to “therapeutic alternatives.”

As far as the motivation for analyzing the impacts of IRA is concerned, Kourouklis noted that the implications for R&D incentives and innovation are unknown at this point, but are likely to be “far reaching.” However, he made the argument that some of the current estimates of innovation ignore complexities of the law and various consequences, such as reduced market entry and competition in a therapeutic class when an MFP is introduced.

When it comes to its impact on rare diseases, the EveryLife Foundation has been involved with two issues that could affect rare disease therapeutic development:

1. The creation of two different timelines for small and large molecules that starts negotiated prices following approval: nine years for small and 13 years for large.
2. An orphan product exemption from negotiation for only drugs approved for single rare diseases.

In the realm of biosimilars, Paraxel’s Gee mentioned that there are two pieces of the IRA that are laid out to lower prices by increasing biosimilar use: a Part B add-on payment and selection delay. Specifically, the add-on payment is increased for those biosimilars that have an average sales price (ASP) that is equal to or below the reference biological prices. And until 2028, eligible biosimilars will become available for the biological reference products’ ASP plus 8%, as opposed to 6%. It must be noted that the add-on payment is temporary, and is intended to not only boost access to biosimilars, but promote competition in the marketplace as well.

Reference: The Inflation Reduction Act Price Setting: What are the Impacts on Biopharmaceutical Innovation from Different Perspectives? June 27, 2023. DIA 2023, Boston.