2025 SOA Health Meeting: Session 9B: Negotiated Drugs - How the IRA Program Impacts the PD Ecosystem -06.24.25- Recording

The Inflation Reduction Act of 2022 included three sections that significantly impacted Medicare Part D: the negotiated drug program, the prescription drug inflation rebate program, and the Part D benefit re-design. The negotiated drug program is the last to take effect and impacts the greatest amount of stakeholders, and likely has the most complicated benefit/cost analysis of any of the three major Part D IRA provisions. Plans, manufacturers, members, PBMs, and network pharmacies are all impacted by the program. The plans benefit by lower drug costs, but some plans may experience premium pressure due to the loss of rebates on these drugs overriding the benefits of the net cost reduction. Additionally, plans with many members taking negotiated drugs will face premium pressures if the proposed 2026 CMS-RxHCC risk adjustment model is adopted (CMS decision will be known by the time of the presentation).
Some members will realize savings from the cost reduction, but other members may experience increased annual costs due to the 'greater of' logic for TrOOP accumulation for Enhanced Alternative plans. Manufacturers of the negotiated drugs are losing Medicare revenues but enjoy a guarantee that their negotiated drugs are on every Medicare plan's formulary. Other manufacturers may face increased pressure to enhance rebates or lower costs to entice plans to keep these competitor drugs on the formulary. Individual pharmacies lose out on much of the margin currently being made on these negotiated drugs due to the reduced spread on pharmacy acquisition costs vs. point-of-sale ingredient costs (likely zero for most negotiated drugs). Even CMS may be a net loser due to pressures on premiums from the loss of rebate dollars (and the 6% limit on base beneficiary premium increases).
This presentation aims to perform a cost-benefit analysis on each of the Part D stakeholders impacted by the negotiated drug legislation, segmenting the presentation into defined discussion sections for each stakeholder. For some stakeholder segments, the presentation will take the form of a debate/game show. For example, when discussing the negotiated drug impact on members, one panelist will represent the Medicare members who realize cost savings from the program, another panelist will represent Medicare members whose out-of-pocket costs are increasing because of negotiation, and a third panelist may represent a Medicare member not on a negotiated drug. For other stakeholder segments, the presentation will take the form of a moderated discussion. For example, the segment on individual pharmacies will focus on how the negotiated drug program will drive losses in operating margins for individual pharmacies, and potentially what strategies pharmacies can pursue to try to push the negotiated drug change to be a revenue-neutral event for them.