John discusses how the new maximum fair prices (MFPs) published by the Centers for Medicaid & Medicare Services (CMS) will affect medication affordability, formulary negotiations, evidence-based strategies, and other aspects of the market.
To learn more, register for CoverMyMeds' October 10, 2024, webinar: The Inflation Reduction Act: What to Watch Following the First Round of Negotiations.
Read on for John’s Insights.
Three Areas to Watch: The Inflation Reduction Act and Prescription Pricing
By H. John Beardsley, Senior Vice President, Corporate Strategy, CoverMyMeds
On August 15, the Centers for Medicaid & Medicare Services (CMS) published the maximum fair prices (MFPs) for 10 drugs, the first in a series of announcements about the price regulation of commonly used medications. The new prices go into effect January 2026. As we enter this next phase of the Act, healthcare stakeholders will be keeping a close eye on its impact as the industry works to adapt and evolve in real-time.
Below, I’ve outlined three things to watch as the program rolls out. Join an in-depth discussion on these topics and more in our upcoming webinar on October 10, 2024.
1. Competitive Dynamics and Formulary Negotiations
With the maximum fair prices for the first round of Medicare Part D drugs now available, the impact on the commercial landscape will be important to watch. Industry leaders should watch how commercial payers leverage the newly negotiated prices in determining patient access for competitive therapies, as well as the impact on formulary negotiations. This will have implications for medications that are required to be covered under the statute, but do not have clear guidelines for how they will be covered in relation to the competitive market. It also remains to be seen if these efforts will ultimately result in the intended cost savings for patients.
Understanding these changes and whether they produce a meaningful change to patient cost sharing will help pharma companies evolve and reevaluate their commercial strategies under the IRA.
2. Operational Considerations for Part B and Part D Drugs
The IRA will likely cause pharma companies to re-examine how they bring certain therapies to market, and how these might differ for therapies covered under Medicare Part B and Part D.
For 2026, CMS selected 10 Part D drugs for price negotiation with drug manufacturers. Most of the drugs selected are late in their product lifecycles with many patents even expiring this year. Though Part B drugs will not be selected for negotiation until 2028, given the complexity of many of these therapies, pharma companies will want to use this time to consider challenges and solutions to their operational strategies.
For example, how will negotiated pricing change competition and demand for therapies, and are clinical development programs and manufacturing facilities equipped to handle this? How might teams need to be restructured to provide support on lower margins?
3. Efficacy of Evidence-Based Strategies
The IRA is setting a federal upper limit in Medicare, capping the reimbursement for certain drugs that are available in retail pharmacies. However, it’s worth noting that many states are doing the same for their patient populations. Pharma companies will need to consider both federal and state level regulations and limitations, synthesize the potential impact, and use evidence strategies to define affordability so they can adhere to these new parameters.
Key to this will be the ability for companies to demonstrate value and differentiation, which is where real-world evidence becomes critical for showcasing efficacy, effectiveness, safety, value, diversity, and adherence data and insights. Real-time data and trend monitoring will be critical in this endeavor, allowing companies a chance to adjust their approach within the year.
The Bottom Line
The coming months will be telling as we chart the initial ripple effects of the first round of negotiated prices across the pharma market. Understanding these changes is crucial for all stakeholders as we navigate the evolving healthcare landscape and work to help ensure patients are benefiting as intended.
For a deeper look at this next phase of the IRA, join me in our upcoming webinar on October 10, 2024, where I’ll be speaking with Fauzea Hussain, Vice President of Public Policy at McKesson and Ashwin Singhania, Partner/Principal of Life Sciences Strategy at EY-Parthenon, Ernst & Young LLP. Together, we’ll discuss many of the topics highlighted here, along with other industry insights and considerations.
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