“Millions of Part D patients who rely on price-controlled drugs will see their money out of pocket … [+]
Just three days before President Biden left office, his appointees tried to tie the hands of new Trump staffers on a health policy decision that will impact the health care system. millions Americans and dozens billions in federal spending.
On January 17, the Centers for Medicare & Medicaid Services announced a new list of 15 drugs under Medicare Part D that will be subject to price controls under the Inflation Reduction Act on January 1, 2027. The list was released this month despite the IRA not legally requiring such a decision until February 1.
And here’s the kicker: While the IRA, which signed into law in August 2022, required CMS to choose fifteen drugs, Biden’s CMS actually selected 19 separate medications.
Despite their affinity for Common Core math, Democratic-appointed bureaucrats aren’t actually that bad at counting. On the contrary, they classified several different therapies– specifically the injectable diabetes treatment Ozempic, the injectable weight loss treatment Wegovy and the tablet diabetes treatment Rybelsus – together as a single drug because they share the same active ingredient, the GLP-1 receptor semaglutide. CMS has also lumped two different treatments together Huntington’s disease and two different treatments for diabetes.
The early announcement was a deliberate attempt to prevent the Trump administration from taking a more moderate course. Fortunately, the Trump White House does not have to accept the decision as one fait accompli.
Courts routinely allow incoming governments to pause the actions of outgoing governments for further review. Certainly, a federal agency’s decision to redefine how to count deserves additional investigation, especially as the chosen medications are taken 5.3 million Medicare beneficiaries and account for about 14% of Medicare Part D’s total gross drug costs.
Even if the Trump administration manages to reduce the list to fifteen different drugs, this will obviously only reduce the IRA’s mounting damage to the margins. Much more comprehensive reforms, or a wholesale repeal by Congress, are necessary.
Consider how, even before price controls for the first ten Medicare drugs take effect next year, the most immediate effect of the IRA has been a steep premium increase within Medicare Part D. Average monthly premiums have increased 21% between 2023 and 2024, while the number of drug plans offered decreased by 11%. They would have risen even further by 2025 if the Biden administration had not developed policies multi-billion dollar bailout from insurers last summer.
Even worse is about to happen. This is evident from a recent report from consultancy Milliman millions of Part D patients who rely on price-controlled drugs will see their out-of-pocket drug costs increase instead of decrease in 2026 due to the law’s restructuring of Medicare drug benefits.
Seniors will also have to jump through more hoops to access the medications they need. Part D insurers will almost certainly limit access to additional medications in response to benefit restructuring and price controls.
Perhaps the most destructive consequence of the IRA is the slowdown in drug innovation. Now that the government has the freedom to impose lower prices on the latest drugs, the financial risks of developing a breakthrough treatment have increased significantly.
Lawmakers implicitly recognized this problem when they hastily assembled the IRA. They gave drugs a period of exemption from price controls after FDA approval. But they messed up their own patch.
The IRA arbitrarily exempts so-called small molecule drugs, which typically come in pill or tablet form, from price controls for nine years after FDA approval. That is four years shorter than the 13 years exemption for large molecule medicines known as ‘biological medicines’. Predictably, companies are already moving away from small molecule research. Economists at the University of Chicago discovered that this could result in ‘pill punishment’ 188 less new small molecule drugs and follow-on indications from the FDA over the next twenty years.
Congress is considering legislation, the EPIC actto solve the pill fine. That would be a good start, just as the Trump administration would pause the price review process for a thorough review of the recent selections.
But ultimately, the only way to completely prevent the damage of the IRA is to neutralize the law itself.