Will the Inflation Reduction Act make waves in other markets?

Before you read on, don’t miss Part 1 and Part 2 of this series detailing how the Inflation Reduction Act will alter the drug market and potentially change the way you choose coverage for your clients.

We talked in Part 2 about how some of the drug price changes might not be as easy to trace as others. And on a semi-related note, there might be evidence to support these changes might not be pinioned in Medicare alone.

Your prices are leaking

The prices negotiated in the coming years will only be legally binding in the Medicare market; therefore, your non-Medicare clients won’t be impacted by the law. But can prices in one sector make waves in another?

After the price is settled, it must be made public information. This alone is not going to drop prices, but it will provide some ground levels for other processes to occur. Let’s dive in.

The consequences of these negotiations might reverberate to other markets too, but the jury is out on whether these consequences will be positive or negative. While some lawmakers tried to sneak the commercial market into the Inflation Reduction Act’s health insurance portions, that part died in Congress, leaving carriers and pharmacy benefit managers open to react how they will. Here are the two takes:

Because price information must be made public for Medicare, it can act as a template for other plans.  But remember, this is unlike the discounts given direct to Part D sponsors after the fact by manufacturers, which we talked about in Part 2 (LINK HERE).

Negotiating plans can look at a published price and say, “if you can make it work for Medicare, you can make it work for me!” It’s tough to argue that logic if you want to do business in a market dominated by one specific carrier. So, the manufacturer agrees, and the price lowers.

The proof is in the insulin

We even have a history of Medicare setting the tone for the rest of the market within another facet of the Inflation Reduction Act: insulin prices.

In 2022, part of the IRA stated that no Part D plan could charge more than $35 per month for insulin covered by Part D after the end of the year. While your Medicare clients celebrated, the rest of your book of business felt left out. But as time went on, that $35 price point started popping up in other markets. It started with two of the three major insulin companies, Eli Lily and Novo Nordisk, announcing their plan to create insulin savings programs. Then, Sanofi announced its plans to lower its insulin price to $35 in March. Then the wave hit Part B in July 2023.

Or maybe not?

But not all experts feel this will play out. Others think the reaction will be reversed, dragging more money in from the other markets instead of spreading the savings outward. Imagine our same scenario as before, but that manufacturer claps back with, “We are the only ones who make this drug, and there is nothing stopping us in your neck of the woods from charging what we want. So, either take the higher price we set, or leave it and get nothing.” Consumers depend on that medication, and the carrier won’t want to walk away from that drug. The enrollees depending on that drug will go elsewhere.

Although the drugs chosen for negotiations this time around make up about 20% of the Medicare market, they make up only about 10% of the under-65 market. So if (and that’s an if) we suppose the drug price changes are small in the Medicare realm, they’ll likely be smaller in other markets. But your clients taking these high-priced drugs will probably take what they can get.

Don’t touch that dial

All of this, no matter which way the cookie crumbles, won’t be a dramatic change for anybody. Some experts claim that Medicare is the paradigm for prices in the drug world, and as the prices shift within, costs will have no choice but to shift without. Opposers say the other markets will be the way to make up the lost profits that used to come from Part D.

The marketplace could follow the beat of the Medicare drum, or it could not. A drug could get negotiated down hundreds of dollars, or it could not. One of the lawsuits pending against the negotiations might pull through and put the kibosh on the negotiations completely. Only time will tell. But if one of your clients is taking a pricey drug, regardless of the market, you should continue to follow this negotiations process. Lower drug prices could be on the horizon, and if not, you can always revisit and find a better-fitting plan.

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Chelsea Smith is learning and development specialist with Action Benefits in Southfield, Mich. Contact her at [email protected].