Payers lean on step therapy, formulary exclusions as IRA reshapes Part D benefit design

Health plans and pharmacy benefit managers are restructuring their benefit designs for both Medicare Part D and commercial plans as a result of changes required in Medicare by the Inflation Reduction Act, according to a new survey by Spherix Global Insights.

The survey found that payer decisions on formulary access, utilization management and drug pricing are beginning to impact commercial plans. The use of prior authorization, step therapy, formulary exclusions and prioritizing biosimilars are efforts that are becoming more common, said Sybil Mead, vice president of market access at Spherix.

“Where goes Medicare, everything follows,” she said in an interview. “Policy starts with Medicare, and plans determine whether it works and then begin implementing on the commercial side.”

Spherix’s survey of health plan pharmacy leaders highlights the spillover impact into the commercial arena. (See table below.) In fact, 59% of those surveyed are using Medicare’s Maximum Fair Prices as benchmarks when negotiating discounts for drugs that were not selected for price negotiations. The Maximum Fair Price, established by the Inflation Reduction Act, allows CMS to negotiate prices for Medicare drugs.

Discounts vary, with reductions ranging from roughly 25% to as high as 60%, and in some early cases up to 85% for certain therapies, particularly in diabetes. Branded diabetes therapies are experiencing the greatest disruption to preferred formulary status, followed by dermatology and rheumatology.

“The payment for the non-negotiated drugs is being driven down, so those drugs would be expected to be rebated a lot more,” Mead said. “We’re seeing a trickle-down, and there is a lot of complication. Medicare price negotiation is negatively impacting the rest of the drugs in those categories.”

Diabetes, dermatology and rheumatology are high-utilization categories within Medicare, Mead said. "There are a lot of high-cost therapies being introduced in these areas because there is a high need,” she said. “This increases the utilization management priority.”

The survey shows that Medicare’s out-of-pocket cap for patients, $2,100 for 2026, has led some payers to restrict formularies. Payers surveyed by Spherix say they are increasing step therapy (68%), raising premiums (65%), accelerating generic and biosimilar preferencing (59%), and expanding total formulary exclusions (54%). The therapeutic categories experiencing the most disruption in preferred placement include diabetes (57%), dermatology (32%), and rheumatology (32%).

Mead said that even traditionally protected areas such as oncology are seeing a shift toward more management. Payers in Medicare are now considering more restrictions that mirror management efforts in commercial insurance.

Payers also expect copay-led benefit designs to fall from 60% to 27% by 2029 as coinsurance becomes more common, potentially increasing patients’ upfront costs when starting treatment.

This shift to coinsurance is an attempt to pass the responsibility for costs onto the beneficiaries, Mead said. The long-term risk, however, is that that these measures could impact patient adherence.

“We’re seeing the same trend to increase the tier structure on formularies. It used to be that government tiers were similar to commercial, where there were three- and four-tier designs. Now it’s more like five- and six-tier designs.”

Payers, she said, are expressing interest in outcomes-based agreements to manage the total cost of care, particularly for high-cost therapies. But Mead said many of these arrangements fail to come to fruition outside of cell and gene therapies.