President Biden recently accomplished a signature goal of his presidential agenda by signing the Inflation Reduction Act of 2022 (IRA) into law. While some will argue that this revised version of the Build Back Better Act will improve healthcare affordability for Americans, policymakers in Washington missed a prime opportunity to enact meaningful change for patients by ignoring the profound negative impact that such policy will have on future medical innovation and discovery. We can’t course correct what the president codified by signing this legislation into law, but we can recognize future opportunities to ensure patient access to current and future medicines.
There are provisions in the legislation that will benefit patients, which are important to recognize. There are several provisions in the IRA that will lower the cost of healthcare for patients, including the $2,000 cap on out-of-pocket costs to Medicare beneficiaries, the extension of higher subsidy levels for purchasing insurance on the federal marketplace, and the $35 cap on the cost of Insulin in Medicare. These measures will all meaningfully improve affordability for patients, particularly seniors with diabetes and other chronic conditions who struggle to afford and access their prescription medications.
However, Congress missed a significant opportunity to protect the very environment that brings patients the treatments they need in the IRA. The bill purports to control drug prices through direct government negotiation with drug manufacturers. Yet, these provisions do not result in actual “negotiation” — but rather allow the federal government to dictate prices at the cost of future investments in research. Price control provisions included in the IRA will create significant disincentives for innovation and future research and development without doing anything to address patients’ increasing costs. While the legislation intends to confront costs that are the byproduct of the entire healthcare system, in practice, it solely targets the innovative biopharmaceutical sector.
The price-setting provisions included in the IRA have been projected to result in 135 fewer new cancer drug approvals by 2039, a nearly 20% drop in research and development activity and a significant loss of jobs in the Unites States. A separate analysis found that price controls for HIV/AIDS medicines will lead to 551 fewer HIV/AIDS clinical trials over a similar time period.
The legislation fails to hold “middlemen” accountable for shifting costs and imposing high cost-sharing on patients. Middlemen, such as pharmacy benefits managers (PBMs), third party administrators, benefits and other for-profit consultants, are prime drivers of the escalating costs that patients confront. For example, the rebates paid by drug manufacturers to PBMs go directly to the PBMs’ bottom lines, rather than to helping patients pay less for their prescriptions. In fact, the three PBMs that control about 80% of the prescription drug market in the U.S. today are owned by insurance companies. This legislation does nothing to reform their practices. While the Federal Trade Commission (FTC) has launched an investigation into PBM practices, Congress failed to address the role of the middlemen in the IRA and missed a prime opportunity to crack down on an exposed driver of patient costs.
Beyond these standalone provisions, the IRA fell short in an attempt to solve the underlying issues that result in higher patient out-of-pocket costs, while damaging future medical innovation. Legislators must now turn their attention to the role of middlemen in the healthcare system if they are to achieve real progress toward making treatments and cures more affordable.
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