Dr Mark Fendrick Outlines IRA Provisions Targeting Prescription Drug Costs

The Inflation Reduction Act (IRA) contains provisions allowing Medicare to negotiate net prices for prescription drugs, but it remains to be seen whether this will translate into savings for beneficiaries, explained A. Mark Fendrick, MD, co–editor in chief of The American Journal of Managed Care^® and director of the V-BID Center at the University of Michigan.

Transcript

The IRA includes provisions to lower prescription drug costs in Medicare. How will they impact beneficiaries?

One of the most noteworthy elements of the health care aspects in the Inflation Reduction Act was for the first time giving Medicare the ability to negotiate for prescription drugs. As you know, value-based insurance design focuses more on out-of-pocket costs than total or net cost of drugs. We like to say Americans don't care about health care costs, they care about what it costs them. So the out-of-pocket elements are more important to us at the V-BID Center. But understanding that there is great consternation and a lot of uncertainty regarding how the Medicare negotiations might happen.

It's being phased in over a number of years focusing on some of the most expensive and popular drugs in the beginning. I've read an awful lot about how this actually might work for consumers but also may backfire, in the fact that there are certain ways around this provision and the fact that launch prices may be increased substantially in the first few years to allow those people who do revenue forecasting to make sure that those innovators who make those drugs are able to achieve what they were hoping to make from a financial perspective. But anything that reduces the cost of drugs to patients at the prescription drug counter is very important to us at the V-BID Center. I'm just hopeful that whatever happens regarding the negotiation of the net price of these drugs translates directly into lower out-of-pocket costs for Medicare beneficiaries.