Biden’s Inflation Reduction Act targets big pharma, promises relief for patients

US President Joe Biden | Credits: AP
US President Joe Biden | Credits: AP

United States: Earlier this year, President Joe Biden initiated plans to decrease family energy bills, generate good-paying jobs, and guarantee that America leads the global clean energy economy. In his first year, the President preserved more lands and streams than any President since John F. Kennedy.

US President Joe Biden said on Wednesday that his government would subject 27 medications to inflation penalties, reducing out-of-pocket expenses for Medicare patients by up to US$390 per dosage, and he promised that additional prescription price cuts would follow, according to the news agency Reuters.

“It’s going to change the way drugs are priced, lower costs for seniors long term,” Biden said in Las Vegas.

People may be surprised that businesses like Eli Lilly and Company have capped out-of-pocket expenses for insulin at US$35 per month, following his public request for reduced diabetes treatment pricing, according to Biden, but “there’s a lot more coming.”

The President’s signature, the Inflation Reduction Act (IRA), included a clause that penalizes drugmakers for charging Medicare beneficiaries prices that climb faster than inflation.

Inflation Reduction Act by President Joe Biden | Credits: Shutterstock

“Starting April 1, Medicare beneficiaries will pay lower co-insurance for Part B drugs that raise prices faster than inflation,” White House Domestic Policy Adviser Susan Rice told reporters on a press call before Biden’s address.

Rice stated that the Department of Health and Human Services (HHS) provided preliminary instructions on how it would conduct its Medicare prescription medication pricing negotiating process on Wednesday, another significant IRA component targeted at decreasing drug costs.

In this regard, as per Reuters, the White House stated in a factsheet that pharmaceuticals facing the inflation penalty include AbbVie’s blockbuster arthritis drug Humira, Gilead Science Inc’s Car-T cancer therapy Yescarta, and Seagen Inc’s targeted cancer therapy Padcev.

Pfizer Inc. had five medications, while Gilead Sciences, Endo International Plc, Kamada Ltd, and Leadiant Biosciences had two, and Johnson & Johnson and Roche each had one.

Most drugmakers’ stocks finished close to flat, with Pfizer ending regular trading up about 1 percent. The government will begin billing corporations for rebates in 2025, while Medicare will start decreasing members’ out-of-pocket expenditures in April. 

Visual Representation of Pharma

The direct impact on drugmakers appears to be minor for the time being, according to Wells Fargo analyst Mohit Bansal in a research note. However, the announcement is “a sign of the government signaling to the industry that it is serious about curbing drug price increases. We suspect companies could be more careful about raising their prices due to this,” he said. 

Medicare began investigating price increases in October 2022 for Medicare Part B medications, which are often used in hospitals and are sophisticated biologic treatments or have just one manufacturer.

The government will update the medicines list every quarter. From 2019 to 2020, price increases for half of the pharmaceuticals covered by Medicare outpaced inflation, which increased 1 percent that year. A third of them saw price increases of more than 7.5 percent, according to the report by Reuters.