Biosimilar competition could surpass IRA-negotiated savings by year three

Selecting biologics facing biosimilar competition for Medicare price negotiations under the Inflation Reduction Act may deliver early savings but sacrifice larger long-term reductions through market competition, according to new research published in November in Health Affairs Scholar.

The first set of negotiated prices takes effect in January 2026. Officials estimated had the negotiated prices been in effect, they would have saved an estimated $6 billion in net covered prescription drug costs, or approximately 22%, across the 10 selected drugs. The negotiation prices for the second round were announced just before Thanksgiving, with these prices set to begin in January 2027.

Among the first set of new prices effective in January 2026 is Johnson & Johnson’s Stelara (ustekinumab). CMS had announced it was able to achieve a 66% savings off the wholesale acquisition cost. In the last few years, the FDA has approved seven branded biosimilars that reference Stelara, with several launching at discounts up to 85% and 90% off Stelara’s list price. Additionally, at least two unbranded biosimilars of Stelara will be available in January 2026, with one offered at a 95% discount.

Related: MedImpact to Offer Unbranded Ustekinumab-aekn Biosimilar

Researchers led by Molly T. Beinfeld, project director of the Specialty Drug Evidence and Coverage (SPEC) database team at Tufts Medical Center’s Center for the Evaluation of Value and Risk in Health, examined the impact through three scenarios.

The first scenario applied historical price reductions following biosimilar entry from 2017 to 2024. The second estimated savings is from the IRA’s negotiated maximum fair price for ustekinumab. The third modeled a modified approach where Stelara was excluded from negotiation and replaced by Ibrance (palbociclib), an eligible high-expenditure drug not selected for the first round of negotiations. Ibrance treats patients with advanced or metastatic breast cancer.

Using average sales price data from CMS quarterly payment files and market share data covering approximately 300 million patients from IQVIA, Tufts researchers analyzed 10 reference products and 30 biosimilars to forecast potential savings.

Although negotiated prices under the IRA achieve greater near-term savings, the modeling suggests cumulative price reductions from biosimilar competition may surpass IRA savings by the third year following market entry. If biologics such as Stelara were deferred from negotiation to allow biosimilars to enter the market, overall Medicare savings could be even greater, the analysis found. Delaying negotiation for these products is possible because the IRA includes a special rule that allows HHS to defer negotiation for biologics expected to face biosimilar competition within two years.

The study acknowledges limitations, including reliance on historical data that may not fully capture evolving contracting strategies under the new policy environment. The analysis also did not account for observed price declines for Stelara because of the 2025 biosimilar launches, potentially underestimating biosimilar competition savings.

“As future negotiation rounds are implemented, policymakers should consider biosimilar readiness, improve transparency in deferral decisions, and support reimbursement incentives to ensure that negotiation and competition operate in alignment to sustain both short-term and long-term savings,” researchers wrote. “Doing so would strengthen the long-term sustainability of the U.S. biosimilar market while preserving the IRA’s goal of reducing drug costs for Medicare beneficiaries.”