The Inflation Reduction Act: Here's What You Need to Know


The Inflation Reduction Act: Here's What You Need to Know

December 15, 2022

Welcome to the December 2022 edition of our Monthly Insight Series. This month we highlight the Inflation Reduction Act of 2022 (IRA).


Season’s Greetings from San Mateo!

All eyes are on the Inflation Reduction Act of 2022 (IRA), waiting in anticipation to see exactly how this massive piece of legislation will impact Medicare patients, providers, payers, and pharmaceutical manufacturers. The IRA will implement expansive prescription drug provisions across Medicare. These are three sections of the legislation that will impact manufacturer pricing strategies and ultimately present additional complexities for planning and forecasting:

  1. Manufacturers will pay additional rebates to CMS if brand price increases exceed inflation
  2. The majority of the cost burden of Part D’s Catastrophic Phase will shift from patients and Medicare to manufacturers and payers. The IRA also limits beneficiaries’ out of pocket costs to $2,000 beginning in 2025
  3. Beginning in 2026, the prices of the top 10 highest expenditure Part D drugs (and Part B drugs beginning in 2028) will be negotiated down to a level lower than ASP.

The impact to providers is less certain: providers should expect a reduction in Medicare reimbursement, which may be offset by a drop in drug acquisition costs based on lower negotiated prices. This impact will be modest if providers can switch to substitutes with higher margins. However, in tandem with recent cuts in the Medicare physician fee schedule and potential cuts from CMS’ MIPS program, these legislations may be quite detrimental to provider revenues. 

In the timeline below, you can see exactly when these provisions are slated to go into effect. To learn about these provisions in more detail, read our recently released 2022 Community Landscape Report!

December 2022 Monthly Insight

As always, please reach out with any comments or questions you have!

All the best...
-- HMP Market Access Insights Team

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