The IRA’s Unintended Consequences for Drug Pricing and Coverage

The Inflation Reduction Act (IRA) may be stifling pharmaceutical innovation and making prescription drug plans (PDPs) more restrictive for patients, according to experts at the Academy of Managed Care Pharmacy 2025 annual meeting. During a panel discussion, industry leaders examined the law’s impact on the US pharmaceutical landscape, particularly as the policy transitions from the Biden administration to the second Trump administration.

The Inflation Reduction Act may be restricting Medicare Part D formularies, increasing patient costs, and stifling pharmaceutical innovation, experts warned at the Academy of Managed Care Pharmacy 2025 annual meeting. | Image credit: Vitalii Vodolazskyi -stock.adobe.com

Reforming Medicare Part D: A Double-Edged Sword?

Julie Patterson, senior director of research for the National Pharmaceutical Council, led the discussion on how the IRA has influenced patient access to medications and formulary design. She began with polling questions to gauge audience perceptions of the IRA’s effects and outlined key changes, including the redesign of Medicare Part D, the elimination of the coverage gap, and the introduction of a $2000 out-of-pocket cap for patients. She also explained the Medicare Drug Price Negotiation Program (DPNP), highlighting its role in targeting drugs with the highest Medicare spending.

The new negotiated prices for the first 10 drugs chosen by CMS for drug price negotiation go into effect in 2026.²

Despite its intended benefits, the IRA may be leading to more restrictive formularies. Patterson noted that beneficiary access to selected drugs is currently higher than to their therapeutic alternatives.

“Medicare Part D redesign may be accelerating, increasing formulary restrictiveness of drugs and competitive classes at a high level. In fact, the median proportion of beneficiaries with coverage of the drugs in these classes dropped 11.4 percentage points in a single year from 2024 to 2025,” she explained.

However, as plans adjust to new cost burdens, they may limit drug availability within competitive classes. Additionally, the shift from co-pays to co-insurance could create financial strain for some patients.

With the introduction of maximum fair prices, Patterson said that selected drugs could lose rebate flexibility, prompting plans to place them on less favorable tiers or apply utilization management strategies. Meanwhile, therapeutic alternatives may retain higher rebate flexibility, incentivizing non-medical switching away from selected drugs. Additionally, increased plan liability under the Medicare Part D redesign could lead to greater formulary restrictiveness, encouraging higher deductibles and a shift from co-payments to co-insurance, further impacting patient affordability and access.

Michael Einodshofer, a pharmacy benefit expert and founder of MerX Pharmacy Consulting, expanded on these concerns, highlighting the IRA’s broad implications for formulary design. While the $2000 cap offers financial relief for some, it also shifts cost burdens to insurers, potentially leading to increased premiums and co-insurance requirements. Einodshofer warned that prescription drug plans (PDPs) might introduce more restrictive formularies to offset these financial risks.

Another unintended consequence could be the impact on drug launch pricing. With manufacturers anticipating price negotiations, there is speculation that they may set higher initial prices to compensate for potential future reductions, ultimately affecting affordability for both patients and payers.

William Sarraille, JD, a regulatory consultant, an attorney, and a professor of practice at the University of Maryland, addressed the IRA’s impact on 340B-covered entities, which serve low-income and vulnerable populations. He warned of rising administrative costs and challenges in managing rebate distributions. Additionally, some providers may shift patients away from Medicare-negotiated drugs to alternatives with higher rebates, potentially limiting access to lower-cost options.

"One of the scariest things about this piece of legislation is that the people who wrote the bill don't really know what's going to happen at this point and have been sadly surprised by some of the things that they have learned, even in the early implementation stages,” Sarraille said.

He emphasized the need for increased transparency and data-sharing mechanisms to ensure accurate rebate allocations and maintain financial sustainability for 340B entities.

Future Adjustments

Patterson, Einodshofer, and Sarraille provided insights into potential policy adjustments and strategies to mitigate negative consequences for patients and providers, noting the rapid changes happening at the federal level with the new Trump administration, including budget changes, grant and funding freezes, layoffs across federal agencies, and health-based executive orders.

As the second Trump administration considers adjustments to the IRA, the conversation around balancing cost containment, innovation, and patient access remains critical. The panel underscored the importance of ongoing dialogue between policy makers, insurers, and health care providers to ensure that cost-saving measures do not come at the expense of pharmaceutical innovation and patient care.

References

1. Einodshofer M, Patterson J, Sorraille W. Inflation Reduction Act ripple effects: considerations for patient access and 340B. Presented at: AMCP 2025; March 31-April 3, 2025; Houston, TX. Accessed April 1, 2025.

2. Mattina C. CMS releases list of 10 drugs subject to price negotiation under IRA. AJMC^®. August 29, 2023. Accessed April 1, 2025. https://www.ajmc.com/view/cms-releases-list-of-10-drugs-subject-to-price-negotiation-under-ira