Inflation Reduction Act Could Cause Delay in New Oncology Treatments Under Medicare Negotiations

In an article published by The New England Journal of Medicine (NEJM), the authors discussed the implications of the Inflation Reduction Act of 2022 (IRA), including how price negotiations could delay launches of new drugs in the oncology space.¹

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The IRA was signed into law on August 16, 2022, and includes lowering health care and drug prices through negotiations directly with manufacturers. The drugs selected are typically high cost drugs that do not have a generic or biosimilar currently in the market.² In August 2023, the Centers for Medicare & Medicaid Services (CMS) announced the first 10 prescription drugs for price negotiation: apixaban (Eliquis; Bristol Myers Squibb and Pfizer); empagliflozin (Jardiance; Boehringer Ingelheim and Lilly); rivaroxaban (Xarelto; Janssen); sitagliptin (Januvia; Merck); dapagliflozin (Farxiga; AstraZeneca); sacubitril/valsartan (Entresto; Novartis); etanercept (Enbrel; Amgen); ibrutinib (Imbruvica; Pharmacyclics and Jansen); ustekinumab (Stelara; Janssen); and insulin aspart injection (Fiasp; Novo Nordisk); Fiasp FlexTouch; Fiasp PenFill; NovoLog; NovoLog FlexPen; NovoLog PenFill.³

The first 10 drugs began negotiations in 2023, with the prices going into effect beginning January 1, 2025.^2,3 In March 2023, CMS started the Medicare Drug Price Negotiation Program, which allows Medicare to directly negotiate the prices of these drugs, working directly with drug companies.³ The price changes that will go into effect in 2026 will also include the requirements from the Medicare Drug Price Negotiation Program. In the future, more drugs will be selected in 2027, 2028, and 2029, with drugs covered under Medicare Part A and Part D eligible for selection by 2028.³

However, these price negotiations could slow the launch of new drugs, specifically in the oncology space, which would affect patient care. According to the authors of the NEJM article, cancer drugs are usually first approved for an indication of a low prevalence cancer or for a later line in advanced disease, expanding to broader indications later. For biologics, Medicare prices would typically take effect as soon as 13 years after FDA approval, but the negotiated Medicare prices for small-molecular drugs would take effect as soon as 9 years after approval, limiting the profit for the company.¹

If companies delayed the launch of new oncology drugs, they could maximize revenue before Medicare negotiations in favor of launching a drug with multiple indications for the initial FDA approval, with small-molecular drugs being the most at risk.¹

The authors emphasized that the downsides to delaying the FDA approvals would outweigh any benefits it might have, even without considering the ethical concerns. First, they said that launching another trial for a disease state is risky since a limited number of phase 2 trials are approved by the FDA, with the probability being highest for the lead indication.¹

Additionally, they said that there are very few drugs that earn half or more of their revenue from Medicare, so by delaying the launch of new drugs, this would also delay profit from public and private payers in the United States, including for off-label uses.

Lastly, the authors said that by delaying the launch of drugs, companies would also lose their exclusivity on their drug’s patent, as filing the composition-of-matter patent is filed before testing begins.¹ Consequently, by delaying the launch of new oncology drugs, patients would not get much needed medication and treatment for their disease state.¹

Delaying medication, the authors said, is not the best strategy for dealing with the IRA’s effects on pharmaceutical companies, as it has clear negative financial and ethical effects.¹

References

1. Vogel M, Kesselheim AS, Feldman WB, Rome BN. Will Medicare price negotiation delay cancer-drug launches?. N Engl J Med. 2023;389(17):1543-1545. doi:10.1056/NEJMp2310269
2. Office of the Assistant Secretary for Planning and Evaluation. Inflation Reduction Act research series: trends in utilization and spending for drugs selected under the Medicare drug price negotiation program. August 29, 2023. Accessed November 1, 2023. https://aspe.hhs.gov/reports/ira-research-series-medicare-drug-price-negotiation-program#:~:text=The%20Inflation%20Reduction%20Act%20(IRA,without%20generic%20or%20biosimilar%20competition
3. Ferruggia K. CMS announces first 10 drugs to undergo price negotiations under Inflation Reduction Act. Pharmacy Times. August 30, 2023. Accessed November 1, 2023. https://www.pharmacytimes.com/view/cms-announces-first-10-drugs-to-undergo-price-negotiations-under-inflation-reduction-act