Episode Details

Somebody wrote on Twitter the other day that he was gonna give a talk on the use of evidence in drug policy, and Barrett Montgomery replied, "That'll be a short talk then!"

So, let's talk about the IRA (Inflation Reduction Act) for a moment, specifically the "CMS can negotiate for drugs for Medicare patients" part of the IRA. There's one topic I don't hear discussed what I would consider maybe often enough.

Will these negotiations result in pricing that is evidence based? Will good drugs that companies developed using less taxpayer money for R&D, drugs that positively impact the patient lives or have spillover benefits for society or save downstream medical costs, drugs that have solid comparative evidence data, drugs that are a meaningful therapeutic advancement over competitors ... will these drugs be priced in line with that value? Everything I just mentioned, by the way, are things that CMS is supposed to take into account during its negotiations.

So, that's what this show is all about. To have this conversation, I invited Dr. Peter Neumann on the podcast because Dr. Neumann (along with his two coauthors, Joshua Cohen and Daniel Ollendorf) just wrote a book about pharmaceutical pricing entitled The Right Price. I convinced Dr. Neumann to come on the show and talk about what the likely impact the IRA will have on these right drug prices. And short version, Dr. Neumann told me that "presumably drugs that offer more therapeutic advances will do better under these negotiations."

Here's a really, really top-line summary of the negotiation provisions that are in the IRA:

CMS will negotiate prices on the highest gross spend top 10 Part D drugs in 2026, 15 Part D drugs in 2027, and 15 drugs from Medicare Part B and D for 2028.

Small molecule drugs become negotiation contenders after 9 years, and biologics after 13 years.

Once a generic or biosimilar comes out (ie, the patent is well and truly expired), then this negotiation provision is no longer in play.

Now, CMS is given some discretion over how it's going to do things, and they will issue guidance and figure out how to implement the law over the next couple of years. As with so many things (and Chris Deacon talked about this recently on LinkedIn), it's how that law is operationalized that actually determines if it achieves this "right price" goal and/or—and Dr. Neumann, my guest in this healthcare podcast, makes this point really clearly, too—maybe the point of the law is as much about cost containment, frankly, as it is about achieving value-based "right" prices. And cost containment and value-based pricing are not the same thing. I'm gonna do a show on this coming up.

So, what are the likely effects of the IRA pharma price negotiation provisions? And not talking about the whole IRA here and the cadre of other stuff like patient out-of-pocket caps and inflation caps. This show is complicated enough just talking about the negotiation portion and just talking about its potential to achieve pricing based on "value."

Here's a summary of likely impact of Medicare drugs being negotiated, some of which we talk about in this episode. There's "seven-ish" main implications:

1. "Some Medicare patients will benefit substantially from negotiations …, as a reduction in the drug's price will result in lower coinsurance and liability during the deductible phase." Okay … this makes sense.

2. "Overall, negotiations are projected by the CBO [Congress