India’s Wetlands Gain Ramsar Status: Modi Praises Conservation Efforts
- The Inflation Reduction Act (IRA), signed into law on August 16, 2022, allows Medicare to negotiate prices for certain high-cost prescription drugs, aiming to lower healthcare costs for...
- government refrained from direct price negotiation, relying instead on market competition and other mechanisms.
- According to the Centers for Medicare & Medicaid Services, the IRA is projected to save Medicare an estimated $102 billion over the next ten years.The Congressional Budget Office...
“`html
The Inflation Reduction Act and Prescription Drug Pricing
Table of Contents
The Inflation Reduction Act (IRA), signed into law on August 16, 2022, allows Medicare to negotiate prices for certain high-cost prescription drugs, aiming to lower healthcare costs for seniors and taxpayers. This marks a meaningful shift in U.S. policy, as previously Medicare was prohibited from directly negotiating drug prices with pharmaceutical companies.
For decades, the U.S. government refrained from direct price negotiation, relying instead on market competition and other mechanisms. The IRA changes this by authorizing the Centers for Medicare & Medicaid Services (CMS) to select drugs for negotiation based on factors like high Medicare spending and lack of generic or biosimilar competition. The negotiated prices will be phased in over several years, starting with 10 drugs in 2026, increasing to 20 drugs by 2029.
According to the Centers for Medicare & Medicaid Services, the IRA is projected to save Medicare an estimated $102 billion over the next ten years.The Congressional Budget Office (CBO) initially estimated savings of $80 billion, but revised its estimate upwards in February 2023.CBO Report
Drugs Selected for Initial Negotiation (2026)
On August 29, 2023, CMS announced the first 10 drugs selected for Medicare price negotiation. These drugs treat conditions such as diabetes, heart failure, blood clots, and certain cancers. The list includes medications like Eliquis (apixaban),Jardiance (empagliflozin),Xarelto (rivaroxaban),and Januvia (sitagliptin). CMS Press Release
The selection process prioritized drugs with the highest Medicare Part D spending and those lacking generic or biosimilar alternatives. Negotiations are ongoing, and the finalized negotiated prices are expected to be published by September 2024, taking effect January 1, 2026. CMS Negotiation Portal
For example, Eliquis, a blood thinner, had Medicare Part D spending of $16.5 billion between 2021 and 2022. Its inclusion in the initial negotiation list demonstrates the IRA’s focus on high-cost medications with significant Medicare expenditure.
Legal Challenges and Industry Response
The pharmaceutical industry has actively challenged the IRA’s drug pricing provisions in court, arguing that the law violates the Fifth Amendment’s takings clause and due process rights. Several lawsuits were filed by industry groups like the Pharmaceutical Research and Manufacturers of America (PhRMA). PhRMA Press Release
As of January 31, 2026, the Supreme Court ruled against the pharmaceutical industry, upholding the constitutionality of the Inflation Reduction Act’s drug pricing provisions. The court found that the law does not constitute a “taking” of property without just compensation.This decision allows Medicare price negotiation to proceed as planned.
PhRMA has stated that the IRA will stifle innovation and reduce investment in new drug growth. However, supporters of the law argue that it will make essential medications more affordable and accessible for millions of Americans. The impact on pharmaceutical innovation remains a subject of ongoing debate.
Future implications and expansion
The IRA’s drug pricing provisions are not limited to Medicare Part D. beginning in 2027, the law also allows Medicare to negotiate prices for drugs administered in doctors’ offices and hospitals under Medicare Part B. KFF Explainer
Furthermore, the IRA includes a provision that caps