Posters Detail Effects—and Uncertainty—of Drug Pricing Negotiations

The arrival of the Inflation Reduction Act (IRA) and the specter that drugs used by Medicare beneficiaries will be subject to price negotiations has set off a wave of research on the fallout for pharmaceutical companies, patients, and other stakeholders.

On Monday, a poster tour on the topic “Drug Price Negotiations,” highlighted selected research during the first full day at the 2024 meeting of ISPOR—The Professional Society for Health Economics and Outcomes Research, taking place in Atlanta, Georgia.

Ambarish J. Ambegaonkar, PhD, founder and CEO of Apperture LLC, guided attendees through the discussion.

Payer Concerns and Effects on Behavior

Dee Chaudhary, MS | Image credit: Clarivate

Dee Chaudhary, MBA, director of Clarivate Commercial Strategy Consulting, presented results from a survey of 20 payers regarding various aspects of the IRA, including drug price negotiations with CMS and Medicare Part D redesign.¹ The authors noted that although the IRA applies to Medicare, commercial payers were also surveyed to gauge how the law will affect the rest of their business.

Although pharmaceutical companies have focused on IRA provisions they say will stifle innovation—the Medicare drug price negotiations—payers appear concerned with elements that will reduce beneficiary cost-sharing, based on the survey results. The top 5 concerns of the IRA based on a forced ranking were: (1) 60% plan cost-share in the catastrophic phase, (2) decreased patient cost-sharing due to $2000 out-of-pocket cap, (3) increase in compliance and administrative costs, (4) likelihood of reduced manufacturer rebates, and (5) a 6% cap on Medicare premium increases.

In addition, payers said the $2000 cost-sharing cap could reduce patient and physician incentives to select lower-cost drugs. Meanwhile, there are concerns that drug manufacturers will try to offset lost Medicare revenue by increasing prices in their commercial business. Finally, Medicare payers anticipate rising drug costs in 2025 from both the out-of-pocket cap and the end of the post-catastrophic cost-sharing requirement.

Potential responses include narrowing formularies to offset increased cost-sharing. Payers also said they expect the lower prices negotiated by CMS for certain therapies in used in Medicare to be extended across commercial lines of business. Widespread plan exits are not anticipated, but this may occur in select markets.

During her presentation, Chaudhary said repeatedly there are many unknowns and longitudinal research will be needed to track payer attitudes and behavior as the effects of the IRA unfold.

Who Uses the First 10 Drugs?

Medicare beneficiaries who take the drugs selected for first round of price negotiation are more likely to have multiple comorbid conditions and be eligible for low-income subsidies, according to research from ADVI Health.² The first 10 drugs selected were largely in classes used to treat cardiometabolic conditions and included anticoagulants, sodium-glucose cotransporter-2 inhibitors, a dipeptidyl-peptidase-4 inhibitor, and insulin.

Caitlin Sheetz, MPH | Image credit: ADVI Health

Caitlin Sheetz, MPH, vice president and head of analytics at ADVI Health, presented findings from an analysis of 100% of 2022 Medicare Part D event claims data. Researchers selected beneficiaries if they had at least 1 prescription among the first 10 drugs selected for drug price negotiations. According to the abstract, demographic information was gleaned from the Master Beneficiary Summary File.

Findings showed that 7,790,044 patients used 1 or more of the 10 drugs. This accounted for 15% of all Part D enrollees. Of this group, 49% were male, 77% were White, and 35% had a low-income subsidy (LIS). A higher share of the LIS beneficiaries were using insulin aspart (62%), etanercept (56%), sitagliptin (53%), and ustekinumab (53%) compared with those who did not have an LIS subsidy.

Results showed that Hispanic beneficiaries had the highest amount of liability for 8 of the 10 drugs, with the highest being ustekinumab at $2166; this was followed by Asian beneficiaries, with their highest being rivaroxaban at $340. More than 50% of the beneficiaries receiving an LIS subsidy exceeded the $2000 out-of-pocket (OOP) threshold in June, compared with 50% of those not on LIS subsidy who exceeded the $2000 OOP threshold in September.

Black beneficiaries had the highest average hierarchical condition category (HCC), at 4.6, while Asians had the lowest at 3.7. HCC is a metric that gauges comorbidity risk and is a barometer of anticipated drug spending.

“Nearly 8 million Part D beneficiaries spent over $3.4 billion in OOP costs on the 10 drugs,” the authors concluded. “Lower negotiated prices would lower beneficiaries' drug costs and potentially increase access to the selected drug. Black, Hispanic, and Asian LIS beneficiaries will be disproportionately impacted by the price negotiations. Further research is warranted to assess the medication usage of these initial drugs and other drugs that become subject to price negotiations.”

Activity at the State Level

Aaditya Rawal, MS | Image credit: LinkedIn

Alongside the IRA’s mandate to address drug pricing in Medicare, several states have created entities to manage costs in Medicaid. Growth in Medicaid, which is jointly managed by the federal government and the states, reached $805.7 billion in 2022, compared with $944.3 billion for

Medicare.³ Aaditya Rawal, MS, of Costello Medical Consulting presented a survey of efforts to rein in Medicaid spending, which began in 2019 when Maryland created the first such board.

Researchers for this project identified Prescription Drug Affordability Boards (PDABs) as “any state-appointed entity tasked with evaluating and regulating prescription drug prices to ensure they remain affordable for consumers.” The team used the National Academy for State Health Policy State Tracker for Laws Passed to Lower Prescription Drug Costs, augmented by independent searches of state website to ensure a robust picture of state-level activity.

As of April 2024, 8 states had authorized the creation of PDABs, although some are not yet operating. Rawal explained they fall into 2 categories:

1. Affordability Review Boards identify and review drugs that are “creating affordability challenges,” and can set payment caps for payers; 3 are active (Colorado, Minnesota, Washington), 2 are authorized to set payment caps but that process is not active (Maryland and Oregon).
2. Strategic Boards recommend spending targets for public purchasers and create overall strategies to optimize affordability; all 3 are operating and publishing annual reports with recommendations (Maine, New Hampshire, Ohio).

Researchers cited the use of wholesale acquisition cost (WAC) or annual WAC increase thresholds as common criteria for setting price thresholds. “While most PDABs have focused on specific cost thresholds for individual treatments, other relevant criteria for prescription drug negotiation…includes pricing history and patent status,” they noted.

Stakeholder input varies, but most allow manufacturer input. The number of drugs eligible for review also varies—it is low as 5 and high as 24.

References

1. Saxena V, Liu J, Stahl J, He A, Chaudhary D. Impact of the Inflation Reduction Act on payer utilization management – Insights from a qualitative survey. Value in Health. 2024;27(6):S1, Poster PT11.
2. Varghese I, Celli J, Kardel P, Liu Z, Sheetz C, Evaluating healthcare costs and demographics of Medicare Part D beneficiaries impacted by first top 10 drugs selected for price negotiations under the Inflation Reduction Act (IRA). Value in Health. 2024;27(6):S1, Poster P9.
3. Eustace J, Neubert S, Rawal A. Comparison of Prescription Drug Affordability Boards Across the United States. Value in Health. 2024;27(6):S1, Poster P2.