Why Does the Inflation Reduction Act Exclude Expensive Cancer Treatments in Price Negotiations?

Abstract

The Inflation Reduction Act (IRA) includes provisions for price negotiations of certain high-spending drugs in Medicare Parts B and D. This provision received considerable attention from those interested in the costs of cancer care since Medicare covers most patients with cancer and many cancer drugs are expensive. We simulate how many cancer drugs may be eligible for IRA price negotiations and examine the reasons that many are likely to be excluded from negotiation. This study uses 2021 Medicare Fee-for-Service Part B and Part D prescription drugs expenditure data. Cancer drugs were identified using the SEER Program list of cancer medications. Our measures included total spending, beneficiary users, and spending-per-beneficiary for all cancer drugs covered under Medicare. Each drug was evaluated for eligibility on the basis of IRA negotiation provisions, including estimated loss of patent exclusivity, current competitors, and orphan drug designation. We found that very few cancer drugs will meet the IRA eligibility thresholds to be included in negotiations. We estimate that only 2.2% of beneficiaries with cancer will see lower costs because of the IRA negotiations. The main reason for this is that although novel cancer drug treatments are priced high, they generally treat relatively few beneficiaries and thus do not meet negotiation eligibility criteria, which are primarily based on a ranking of total spending. The IRA negotiation provisions will have limited impact on cancer drug prices and will likely leave most patients with cancer exposed to high drug costs.