Passed in a 51-50 vote on Sunday, the Inflation Reduction Act’s key prescription drug provisions are limited to Medicare, likely resulting in price increases for employers and their employees as manufacturers find ways to recoup losses in the commercial market from reduced Medicare sales.
Employers likely to see increase in drug costs: Previous versions of the Senate bill had included the commercial market in provisions allowing Medicare to negotiate drug prices. However, these were removed according to reconciliation rules as well. Employers would therefore not have access to negotiated drug prices, likely increasing drug costs. However, many employers will likely attempt to limit drug price increases by renegotiating prescription drug contracts using the Medicare rates.
The Senate Parliamentarian ruled the inclusion of the commercial market in inflation caps on future prescription drug cost increases did not adhere to Senate reconciliation rules, making the reform limited to those in Medicare. The Senate Parliamentarian also ruled that a cap on insulin costs for those in the commercial market violated senate rules as well. However, given this provision is a key campaign promise of Democrats, it was kept in the bill only to be later challenged by Republicans and removed.
Drug price negotiations will begin in 2026: Medicare will be able to negotiate the price of 10 prescription drugs starting in 2026, adding 15 drugs in 2027 and 20 drugs in 2028. These drugs will be predetermined by several factors, including the amount CMS pays pharmacies for the drugs as well as whether they have had any competition while on the market. How these drugs are determined could be fiercely debated in the regulatory arena in the coming years.
Outlook: The House is expected to pass a bill including the drug provisions on Friday. HR Policy will continue to urge Congress to reevaluate these provisions as they do not protect employers and employees and their families from price increases.