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The IRA One Year Later | Asembia 2024


Cencora’s Corey Ford says after the IRA’s out-of-pocket cap goes into effect next year, Part D plans are expected to put in place more narrow drug coverage and pharma companies will likely face a more competitive environment.

Corey Ford

Corey Ford

There could be some unintended consequences from the Medicare’s cap on beneficiary out-of-pocket costs, according to Corey Ford, vice president of reimbursement and policy insights at Cencora. Ford presented today at the 20th annual Asembia Specialty Pharmacy Summit in Las Vegas about the Inflation Reduction Act one year later.

In an interview before the meeting, Ford talked about the possible impact of the $2,000 out-of-pocket cap on both pharmaceutical companies and Part D plans. The cap will go into effect in 2025, and then it will be indexed annually to the rate of change in Part D costs. This is on top of a change that went into effect this year that eliminates the 5% coinsurance in the catastrophic phase of the Part D benefit.

Q: What do you think will be the impact of the IRA’s cap on out-of-pocket costs?

A: The $2,000 cap goes into effect next year and that gets adjusted for inflation in the following years. That’s going to change patient exposure to costs. Other stakeholders in healthcare, including the pharma companies, are planning for this and I believe it will have an effect on the cost burden they have to bear after the $2,000 cap. From a patient perspective, this is a good thing, particularly for specialty medications. Their costs are likely to go down.

But there could be some unintended consequences. The challenge for biopharma companies is that they will have higher liabilities than previously. Biopharma manufacturers now have to pay 10% in the initial coverage phase; they will be required to pay 20% after the cap. For pharma, this is going to be a much more competitive environment. Pharma needs to adapt to highlight the key value messages about how their product stands apart from the competition.

Part D plans specifically are going to get hit hard here. Plans will have to pay 60% in that post cap period, when they only paid 50%. So, this will be a huge impact.

Q: How do you think Part D plans are likely to respond to the cap on out-of-pocket costs?

A: We at Cencora did a survey of Part D plans, which validated our thinking for what was likely going to happen. They’re expecting much narrower drug coverage, more narrow formularies, higher utilization management, greater price concessions from industry and even a smaller number of plans available to beneficiaries. For specialty medications in particular, we’ll see higher use of prior authorization.

I think we’re going to see much narrower formularies, particularly outside of the protected classes such as oncology, epilepsy, immunosuppressants and anti-retroviral products. In very competitive classes, we may get down to a point where there may be just two drugs per class covered, according to the USP Medicare Model Guidelines. This is going to make this much more competitive from a contracting standpoint, especially in rheumatoid arthritis, psoriasis and maybe even diabetes and cardiovascular.

This could impact biopharma companies’ patient assistance programs. The underinsured need is going down because of this cap, but the functionally uninsured D could potentially go up as drug coverage becomes narrower.

In terms of premiums, this is a 6% cap on base beneficiary premium, but this is just one of four components that goes into a plan’s premium. They can raise these other areas. And in fact, in 2024, we saw an increase in the average Part D premium of $5 increase. That’s a lot because this has been an incredibly stable market. We’ve only seen fluctuations by pennies for the past eight to 10 years.

Q: What could happen if there is a change in administration in January 2025?

A: it's an interesting question, and one I get pretty frequently. I will say that it’s incredibly unlikely that the IRA would get repealed, even in a second Donald Trump administration. A lot of things would have to fall in place for it to be fully repealed. I'm not an attorney, but I am keeping an eye on the lawsuits against the drug price negotiation program.

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