The unintended consequences of the inflation reduction act on biosimilar market incentives and Medicare savings
Year: 2025
Type: article
Abstract: Introduction: The Inflation Reduction Act (IRA) authorizes Medicare price negotiation but includes a "special rule" deferring negotiation for biologics with "imminent" biosimilar competition. This study examined the potential impact of this provision on Medicare spending. Methods: We modeled Medicare savings under three hypothetical scenarios. In Scenario 1, we applied historical price reductions following biosimilar entry (2017-2024) for 10 reference products and 30 biosimilars to forecast savings for ustekinumab (Stelara) after biosimilar entry. Scenario 2 estimated savings from the IRA's negotiated maximum fair price for ustekinumab. Scenario 3 modeled a modified IRA implementation policy in which ustekinumab was excluded from negotiation and replaced by palbociclib (Ibrance), an eligible high spend drug that was not selected for the first round of Medicare price negotiation. Results: Across all biologics in our sample, historic market-weighted prices declined to 40.3% of pre-entry levels within five years of biosimilar launch. Negotiating ustekinumab under the IRA yielded greater first-year savings, but cumulative savings were highest in the modified scenario-combining negotiated discounts for palbociclib with biosimilar-driven price declines for ustekinumab. Conclusion: Selecting biologics with near-term biosimilar competition for IRA negotiation may produce short-term savings but forgo greater long-term savings achievable through competition.
Source: Health Affairs Scholar
Authors: Molly T Beinfeld, Priyanka Ghule, Fariel LaMountain, William Wong, Stella Ko, James D Chambers
Institutions: Tufts Medical Center, Genentech
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $3,150
Funder: Genentech
OpenAlex ID: W4416366177