Exploring the Process for the Inflation Reduction Act Drug Price Negotiations

The Democrats’ Inflation Reduction Act includes a provision to let the US government negotiate the prices of certain medications for Medicare recipients. If passed, Medicare would be able to negotiate the price of 10 drugs in 2026 and another 20 by 2030. The slate of drugs targetted would include expensive brand-name drugs for conditions like cancer, diabetes, and HIV. Any drugmaker that backs out of the deal would face up to a 95% tax on prior-year sales, an incentive panned by the industry

According to Politico Pulse, “The government expects to have the advantage. A Congressional Budget Office analysis predicted negotiation would reduce the government’s drug costs in Medicare by nearly $102 billion over 10 years. The pharmaceutical industry argues that cutting its income would reduce the incentive to bring new medicines to market. The Congressional Budget Office estimated that negotiation would have limited impact, reducing new drugs by 15 out of 1,300 expected over the next 30 years.”

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(Source: Politico, August 10th, 2022)