Highlighting Medicare Savings from Negotiating Drug Prices with IRA Lead to Substantial Savings

Revolutionizing Medicare Drug Price Negotiations


The Inflation Reduction Act (IRA) is poised to transform Medicare spending by potentially saving billions of dollars through drug price negotiations. A recent study delved into the impact of the IRA from 2018 to 2020, revealing substantial savings of $26.5 billion, equivalent to 5% of total Medicare expenditure.

Current Negotiations and Future Outlook

The negotiations for the first 10 drugs have already begun, with drug companies submitting counteroffers in early March 2024. The US Department of Health and Human Services plans to finalize negotiations by the end of August 2024, with revised prices coming into effect in 2026.

Key Takeaways

Researchers conducted a simulation to assess potential Medicare savings under the IRA, projecting significant cost reductions. The IRA enables the selection of 10 drugs in the first year, 15 in the following years, and an annual selection of 20 drugs thereafter.

Implementation of the IRA

The IRA aims to negotiate prices for high-cost drugs to maximize savings for Medicare beneficiaries. Selected drugs must meet specific criteria, including annual Medicare spending exceeding $200 million and FDA approval for a minimum of 7 years.

Drug Selection Process

CMS will prioritize drug selection based on spending levels, ensuring that negotiations target drugs with the highest costs. All negotiated drugs will have a maximum ceiling price set at 75% of the non-federal average manufacturer price for drugs approved within the last 16 years.

Simulation Results

Researchers utilized Medicare data to simulate the selection and negotiation of drugs under the IRA. The study revealed that Medicare could have saved $26.5 billion over the period 2018-2020 if maximum fair prices had been set, resulting in a substantial reduction in total drug spending.

Projected Savings and Implications

While the study’s findings provide insight into potential savings, the actual outcome remains uncertain. Factors such as required rebates from manufacturers may influence the final impact of the IRA on Medicare spending.


The IRA represents a significant step towards controlling Medicare costs through drug price negotiations. As negotiations progress and prices are revised, the true extent of savings for Medicare patients will become clearer.

Read More of this Story at www.drugtopics.com – 2024-04-05 18:50:42

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