IRA drug price negotiation has not increased launch prices, study finds

After the Inflation Reduction Act (IRA) was assessed and was signed into law in 2022, experts started to weigh in on what it would mean for drug prices and the pharmaceutical industry to have Medicare start negotiating the prices it pays for drugs for the very first time. One idea that bubbled to the surface is that the lower prices negotiated by the largest purchaser of U.S. healthcare would have a major effect on drug company economics and the profit margins of their products. IQVIA’s Luke Greenwalt, a member of the Managed Healthcare Executive (MHE) editorial advisory board, said that IRA price negotiations were one of the factors that shorten the “economic lifespan” of pharmaceutical products. Other commentators said that Medicare’s new, IRA-minted pricing power and the resulting leaner margins in the out years of brand-name drugs' time on the market could lead to big jumps in prices when drugs are first launched as drugmakers look for ways to sustain profitability. Avalere Health’s Laura Housman, Dr. P.H., M.P.H., MBA, and her colleagues wrote a blog post in April 2023 about how that “condensed timeframe to recoup investments in products” may lead to “increased launch prices as manufacturers prepare for eventual price reductions in Medicare, especially for products targeted for the Medicare population.”

Harvard-affiliated researchers are reporting research results today about launch prices over a nearly 20-year period that show that wholesale acquisition cost (WAC) prices of drugs newly hitting the market have soared, but their statistical techniques for showing before-and-after trends found differences after the IRA passed.

“Drug launch prices have continued to climb, but there was no evidence that manufacturers have thus far responded to IRA by establishing higher launch prices,” wrote corresponding author Benjamin H. Rome, M.D., M.P.H., and his colleagues at the Program on Regulation, Therapeutics, and Law at Harvard-affiliated Brigham and Women’s Hospital and Harvard Medical School.

The findings by Rome and his colleagues echo those reported last year, also in JAMA, by Vanderbilt’s Stacie B. Dusetzina and her colleagues that showed increases in launch prices of self-administered anticancer drugs in 2023-2025 were not out of keeping with price increases prior to the IRA.

The analysis by Rome and his colleagues included 643 drugs. They found that median [IQR] launch prices increased $38,857 in 2008-2013 to $254,213 in 2020-2025, a sixfold increase.

Not surprisingly, launch prices for cell and gene therapies were nearly ten times higher than the launch prices for small-molecule drugs. Thirty-two (5%) of the 643 drugs in their analysis were cell and gene therapies.

When Rome and his colleagues looked at launch price trends before and after the IRA, they found that prices increased, after some statistical adjustments, 7.82% per year prior to the IRA. They identified a trend change of -3.71% after the IRA. In an email to MHE today, Rome noted the wide confidence interval around that nominal figure and, therefore, its statistical iffiness.

“I think it's fair to say that the trend was statistically similar before and after, somewhere in the 8% range,” he wrote in an email, noting that the trend was higher than inflation.

In JAMA, Rome and his colleagues wrote that monitoring launch prices is important, pointing to other policy developments, such as the Trump administration’s most-favored nations policy.

Dusetzina and her colleagues wrote that their findings about the launch prices of self-administered cancer drugs “suggest that companies were already engaging in price maximization for anticancer therapies and continued to do so after the implementation of the IRA.” Without identifying them, they said that further efforts may be needed to “better align prices with drugs’ clinical benefits.”