Inflation Reduction Act: A Battleground for Health Care Policy

Among the financial benefit tenets of the Inflation Reduction Act (IRA) as they relate to the medical field and Medicare are that it lowers prescription drug costs through price negotiation, improves access to affordable care for millions, and helps to reduce the impact of inflation.¹

At the same time, there are no fewer than 6 lawsuits currently pending against the IRA, filed by Merck, the US Chamber of Commerce, Bristol Myers Squibb, Pharmaceutical Research and Manufacturers of America, Astellas Pharma, and Johnson & Johnson. The lawsuits allege that the drug price negotiation claims do not equate to a genuine effort to negotiate, the excise tax is more of a punishment, there is lack of public oversight on the drug price negotiations, and it violates speech and property rights under the First and Fifth amendments, respectively.²

Yesterday, in a contentious but reserved Senate Finance Committee hearing³ on the IRA and its purported financial benefits—depending on who was testifying—it was evident that the debate surrounding this slice of legislation is not going away anytime soon.

As portrayed through testimony from an older patient and retired registered nurse, a doctor and senior fellow at a progressive think tank, an expert and professor of public policy and law, and fellows from a nonpartisan think tank and a conservative think tank, the impact of the 2-year-old law on drug prices and health care access continues to reverberate and divide. Joining Finance Chairman Ron Wyden (D, Oregon) and ranking member Mike Crapo (R, Idaho) were:

• Judy Aiken, a retired registered nurse who provided the patient perspective
• Jeanne Lambrew, PhD, director of health care reform and senior fellow at The Century Foundation, a progressive, independent think tank
• Rena Conti, PhD, dean’s research scholar and associate professor, markets, public policy and law, Questrom School of Business, Boston University
• Kirsten Axelsen, MS, nonresident fellow at the American Enterprise Institute, a nonpartisan think tank, and senior policy advisor at global law firm DLA Piper
• Theo Merkel, senior research fellow at the Paragon Health Institute and senior fellow at the Manhattan Institute, both conservative think tanks

Judy Aiken | Image Credit: © Patients for Affordable Drugs Now

Aiken kicked off the witness testimonies against the background of a medical history that has seen her fight psoriatic arthritis and psoriasis for 40-plus years and seen her face a fierce battle between her body and her finances. “These conditions have taken a heavy toll on my body, but the financial strain of the medications I need has been equally challenging,” she said.

In the 26 years she has been taking Enbrel (etancercept; Amgen), her “lifeline,” the cost for a 30-day supply has skyrocketed 700% to now be $7106, and last year she paid $9000 out of pocket (OOP) for 1 medication. She also has had to skip doses and endured bouts of anxiety from prohibitive costs and postponed needed house repairs from these financial constraints. By March of this year, her monthly visits to the pharmacy saw her OOP costs go from $2150 in January to $1141 in February to $0 in March.

Lifelines for her have been that the OOP cap for Medicare Part D beneficiaries will top out at $2000 in 2025, because of the IRA, and decades of advocacy for lower drug prices mean that the first 10 drugs covered under price negotiation will result in a projected OOP savings of $1.5 billion by 2026 alone. “Roughly 9 million patients on Medicare will take at least 1 of these drugs,” she explained. “This is the real tangible impact of the IRA—seniors like me who can now afford medications we need to live healthier, more productive lives with dignity.”

Kirsten Axelsen, MS | Image Credit: © American Enterprise Institute

Axelsen was up next, and she addressed how there is great potential for the IRA to restrict clinical development for both new and existing medications, and she sees no benefit to the 10 drugs first chosen for price negotiations that ”already had large privately negotiated discounts and preferred formulary positions.”

Was this the right place to focus this expensive, time-consuming effort, she posited?

“Possibly the people who drafted the inflation Reduction Act wanted to fix the rare situation where a popular brand drug does not ever face generic competition,” she stated. “Possibly, they wanted to see more value assessment for drugs in the US. But the inflation Reduction Act accomplishes neither.”

Through her testimony, she also explained how the IRA includes provisions that both benefit and could damage the pharmaceutical industry and the health care sector; formularies could become more restrictive and beneficiaries would be encouraged to use physician-administered Part B medicines over those they can pick up at a pharmacy.

There is potential for great harm from the law, was her overall message, with the IRA accelerating the trend of eroding Medicare drug benefits, imposing significant administrative burdens, preferring short-term subsidies to structural reforms, and restricting researchers from accessing Medicare data. Further evaluation is needed to determine its overall impact on health care and drug access.

Rena Conti, PhD | Image Credit: © Boston University

When it was Conti’s turn next, she reiterated the cost and tax benefits through data, providing a sharp contrast to Axelsen’s mixed review.

“The US remains the largest market for pharmaceuticals worldwide and other measures of sector health, such as merger and acquisition activity and venture capital spend are improving compared to prereform by industry leaders’ own accounts to shareholders,” she stated.

Empirical evidence is available, she continued, that can back the claim that these reforms are fiscally responsible, both those that have taken effect and will shortly take effect. According to the Congressional Budget Office (CBO) alone, she explained, there is potential for up to $58 billion in savings against the federal deficit, with $31 billion of that attributable to 3 provisions alone. Then there are the millions of seniors who have already benefitted from Medicare Part D redesign, in part to the new OOP caps on insulin and adult vaccines, and those with spending above the catastrophic cap. Inflation rebates have reduced OOP costs, too, for thousands of older Americans, with these reforms increasing access to medicines through affordability measures, encouraging competition, and supporting innovation.

Theo Merkel | Image Credit: © Paragon Health Institute

Merkel seemed to throw down the gauntlet, exclaiming that the American health care system is flawed and the IRA is no more than a superficial fix that will undermine the quality and value of health care in the long run through an “expensive Affordable Care Act sugar high–induced likely illegal taxpayer bailout of Medicare Part D plans.”

He, too, brought CBO data into the mix, but to illustrate that the increased taxpayer subsidies going to insurance companies would increase federal Affordable Care Act (ACA) spending by $415 billion over 10 years. Then there’s that plans offered under the ACA are of poor quality anyway, he added, citing a paper from his own Paragon Health Institute that claims government subsidies are to blame and that insurers have less incentive to design valuable plans the people don’t pay for.⁴ These “erroneous subsidies” are the result of taxpayers “over- or underestimating their income to obtain higher assistance than the law permits,” he said.

The price controls put forth have enormous consequences, some intended and many not, on 3 fronts: resource allocation, care delivery, and future innovation. “So far, the IRA drug provisions are an example of unintended consequences,” he said. Previously announced discounts have already been spent as financial bailouts of Medicare Part D plans, plan premiums have increased, the underlying values of drugs has not been addressed, and seniors have yet to see significant savings.

“The focus,” he emphasized, “should be on improving the value of health care plans rather than just reducing costs.”

Jeanne Lambrew, PhD | Image Credit: © The Century Foundation

Lambrew brought the witness testimonials to a close, with a call to action: the positive impact on health care access and affordability, the gains seen with more Americans having health care coverage, will be lost if Congress does not extend the IRA. She highlighted the coverage and access gains, lower overall coverage costs, health care equity improvements, and the cost-effectiveness of the law.

For example, she cited how the IRA has contributed to a record low uninsured rate, with the total of uninsured Americans dropping by 11 million, and that fewer people classified as having a middle income are delaying care and skipping their medications. People covered by Marketplace plans also now pay lower premiums, with financial assistance averaging $800 per enrollee in 2023 alone, and more Healthcare.gov enrollees had access to more plan choices (3 or more) in 2024 (96%), including those with lower cost sharing thanks to the tax credit.

“The average annual premium tax credit under the policy for low-income and high-income enrollees is comparable to the federal subsidy for the Medicaid expansion group and a tax break for employer coverage, respectively,” she said. “This suggests a relatively reasonable public cost of coverage under the IRA, and the law has done so without significantly crowding out employer-sponsored insurance, which remains a predominant source of coverage for American.”

“This law has saved lives,” she emphatically stated.

References

1. Inflation Reduction Act and Medicare. CMS. Updated September 10, 2024. Accessed September 18, 2024. https://www.cms.gov/inflation-reduction-act-and-medicare#:~:text=The%20Inflation%20Reduction%20Act%20provides,a%20redesigned%20prescription%20drug%20program

2. Palmore JR. legal battles continue over Inflation Reduction Act’s drug price negotiation measures. Morrison Foerster LLP. July 24, 2023. Accessed September 18, 2024. https://lifesciences.mofo.com/topics/legal-battles-continue-over-inflation-reduction-act-s-drug-price-negotiation-measures?_gl=1*15rpgly*_ga*MjA0MTQzMTM4Ni4xNzI2NjY5NzYy*_ga_3HVRG7GH76*MTcyNjY2OTc2MS4xLjEuMTcyNjY3MDgwNy4wLjAuMA

3. Lower health care costs for Americans: understanding the benefits of the Inflation Reduction Act. United States Senate Committee on Finance. September 17, 2024. Accessed September 17, 2024. https://www.finance.senate.gov/hearings/lower-health-care-costs-for-americans-understanding-the-benefits-of-the-inflation-reduction-act

4. Cruz D, Fann G. It’s not just the prices: ACA plans have declined in quality over the past decade. Paragon Health Institute. September 2024. Accessed September 18, 2024. https://paragoninstitute.org/wp-content/uploads/2024/09/Its-Not-Just-the-Prices_Dan-Cruz_Greg_Fann_FOR-RELEASE_V1.pdf