What’s Going On with the IRA?: An update on the Inflation Reduction Act with Jamie Sullivan

Posted on October 23, 2023   |   

This article was written by Bailey McCrary.

My name is Bailey McCrary, Advocacy and Public Policy Manager at the COPD Foundation. As you may be aware, changes to Medicare have been discussed by the United States government. Because these changes could impact COPD patients, I wanted to learn more about one of the sources of these changes: the Inflation Reduction Act. I decided to chat with Jamie Sullivan, Senior Director of Public Policy at the EveryLife Foundation for Rare Diseases. Jamie spent 10 years with the COPD Foundation and is a subject matter expert on health policy. She will help us understand the origins of the Inflation Reduction Act (IRA), what it looks like today, and what the future may hold for individuals impacted by this legislation

Jamie has been tracking the Inflation Reduction Act for many months now, and we are so happy to be able to connect with her to get a better understanding of what is going on with this critical American policy.

Can you describe how the Inflation Reduction Act came to be?

The Inflation Reduction Act, or the IRA, was passed in August of 2022 on a partisan basis. "Partisan" means it was developed and passed with support from only one political party, in this case - democrats. The IRA deals with many issues, including domestic energy production, climate change, IRS reform, and healthcare.

The IRA was passed as a "reconciliation" bill, allowing a simple majority of at least 51 votes in the Senate. This bypassed the 60-vote requirement that often holds up legislation without support from both Republicans and Democrats. When reconciliation is used to pass a bill, everything in the bill must directly impact the federal budget. This rule limited what the IRA can do, especially in the healthcare space. You can view a glossary of legislative and advocacy terms here.

It sounds like the IRA impacts many different parts of United States policy. Specifically, how will the IRA affect people with COPD?

We might need a novel rather than a Q&A session to talk about all the ways the IRA affects healthcare. Let's tackle some of the big impacts. If you want to dive deeper, I love this overview from Kaiser Family Foundation.

Most of the changes in the IRA affect people with Medicare, with one big exception. If you buy insurance from a "marketplace" set up by the federal or state government, you might receive subsidies to help afford the monthly payments. When COVID started, the amount of the subsidies was increased temporarily. The IRA extended the higher subsidies until 2025. By extending them, more people can buy a plan for very little or no cost.

There are more changes for everyone on Medicare. This year, out-of-pocket costs for vaccines received through your Medicare Part D drug plan, such as the vaccine for shingles, were eliminated. Starting on October 1st, there are also no out-of-pocket costs for vaccines if you have Medicaid.

Most changes start in 2024 or later. The biggest change will be in 2025 when the amount you have to pay each year for drugs covered by Medicare Part D will be capped at $2,000 per person. In the past, Medicare was one of the only insurance providers to NOT put a cap on the amount you could pay out-of-pocket each year. Unfortunately, the cap only applies to drugs, and not services or treatments you may receive under Medicare Part A or B. This is still a big step! Next year, if you have very high prescription costs, you may notice some relief. In 2024 the IRA eliminated the 5% coinsurance you pay after you reach $3,250 in annual spending.

The "smoothing" program also begins in 2025, which will allow you to spread out the expected annual cost of your drugs each month. Smoothing programs will hopefully mean more people can continue treatment without disruption by removing higher healthcare costs at the beginning of the year.

Last but not least, the IRA created the Medicare Drug Price Negotiation Program. This gives CMS the ability to negotiate the price for a limited number of prescription drugs. The first negotiated prices will go into effect in 2026. This is a big change, but the impact will be gradual.

Are any of these changes anticipated to make life better for individuals on Medicare?

People who regularly spend more than $2,000 per year on their prescription drugs may benefit the most from the changes in the IRA. However, they aren't the only ones who will see lower costs. The IRA increased the income limits for the Medicare Low Income Subsidy program to 150% of the federal poverty level. This means more people will qualify for the program that helps pay for Medicare Part D premiums and drug costs starting in 2024. People may also see reduced out-of-pocket costs for the drugs that are part of the negotiation program. Exactly how much the cost could be reduced is not yet known, but those who pay a coinsurance (percentage of a drug's cost) versus a copay (flat amount) are likely to see savings.

Do any of these changes potentially hurt individuals on Medicare? What about lung health patients in general?

We likely won't see the negative impacts from the IRA play out for some time. However, there are a few areas that require some monitoring as the new law rolls out, which is not unexpected for a big change like this. We should make sure that we fully understand how the changes affect access to the drugs you need and carefully watch any negative impact to investments in future research to find new treatments. The good news is the drugs that are part of the negotiation program are required to be covered by your Part D plan. The challenge is insurers aren't required to cover the drugs that aren't negotiated and there are no rules about how much coinsurance or copay they can charge. Insurers are also being asked to spend more on drugs. The higher costs for insurers could result in problems with limited drug formularies, prior authorization, and other actions designed to lower their expenses.

The other concern is that the design of the negotiation program will harm overall innovation for patients long-term. This could look like lower overall investments in research or less attention to conditions that are common in the Medicare population, like lung conditions. It is hard to know for sure what will happen, but many studies are coming out that suggest some impact to future research.

How will Medicare negotiate drug prices?

When Medicare Part D was created, CMS was forbidden from negotiating drug prices. The IRA removed that restriction, allowing CMS to begin negotiating prices, starting with 10 drugs. Each year that number will increase, and in 2028, Part B (outpatient clinics) treatments will become eligible.

We could spend half the IRA novel on the details of the negotiation program, but here are a few basics on how it will work:

  • Eligible drugs will have been on the market for either 7 or 9 years, depending on the type, and have no generic competition. The drugs that cost Medicare the most each year are most likely to be included in the early years of negotiation.
  • Some drugs are exempt from the negotiation program. Notably for those with Alpha-1, plasma-derived drugs are exempt, as are drugs designated for one rare disease with only one FDA-approved use.
  • The negotiation process is a series of information exchanges between CMS and the drug's manufacturer, with opportunities for the public to provide information as well. The outcome is a "maximum fair price" set by CMS that the manufacture will either have to accept, pay penalties, or withdraw the product from Medicare coverage. This process will take over two years. CMS just announced the list of the first 10 drugs, and the new negotiated prices would go into effect in 2026.

What drugs are being negotiated during this first round?

CMS released the list of the first 10 drugs to be negotiated on August 29, 2023. The drugs on the list are for blood cancer, diabetes, heart disease, and other common conditions. No COPD drugs were included.

Why were COPD drugs not picked for negotiation? Is this a good or a bad thing?

A few COPD drugs aren't eligible for negotiation because there are generic versions available. We thought that one might make it on the list, but it turned out not to be among the top 10 most costly drugs selected this round.

What can we expect to happen now?

CMS is holding listening sessions to hear from patients and healthcare workers about the drugs that were selected. Part of the negotiation process is learning about treatment alternatives, clinical benefits, and more. Even though COPD drugs weren't on the list, if you take one of the 10 drugs included and want to learn more about the listening sessions, click here.

Will COPD drugs ever be negotiated?

Each year the number of drugs included in the negotiation program will grow, so it is likely that at some point, at least one COPD treatment will be selected.

How can our community get involved and stay informed about all these changes?

With any new program, changes will be needed over time. Stay in touch with the COPD Foundation for updates. Share any experiences you have with changes resulting from the IRA that could help policy makers monitor negative impacts to patients. For example, if you notice an insurance company creating more barriers to accessing the drugs you and your doctor feel are best for your condition, let the COPD Foundation know.

Thank you, Jamie, for helping us understand the changes launched by the IRA and the impacts of these changes on lung health patients. While the IRA is complicated and many things are still unknown, it is clear that this legislation could impact COPD patients and the pharmaceutical world overall. We will continue to keep our community updated on the status of the IRA and any changes that could impact their lives.

To our readers, share your thoughts in the comments, or if you have any specific questions about the IRA, please reach out to me at bmccrary@copdfoundation.org. Thank you!


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