Why Does the Inflation Reduction Act Exclude Expensive Cancer Treatments in Price Negotiations?

PURPOSE: The Inflation Reduction Act (IRA) includes provisions for price negotiations of certain high-spending drugs in Medicare Parts B and D. This provision received considerable attention from those interested in the costs of cancer care since Medicare covers most patients with cancer and many cancer drugs are expensive. We simulate how many cancer drugs may be eligible for IRA price negotiations and examine the reasons that many are likely to be excluded from negotiation. METHODS: This study uses 2021 Medicare Fee-for-Service Part B and Part D prescription drugs expenditure data. Cancer drugs were identified using the SEER Program list of cancer medications. Our measures included total spending, beneficiary users, and spending-per-beneficiary for all cancer drugs covered under Medicare. Each drug was evaluated for eligibility on the basis of IRA negotiation provisions, including estimated loss of patent exclusivity, current competitors, and orphan drug designation. RESULTS: We found that very few cancer drugs will meet the IRA eligibility thresholds to be included in negotiations. We estimate that only 2.2% of beneficiaries with cancer will see lower costs because of the IRA negotiations. The main reason for this is that although novel cancer drug treatments are priced high, they generally treat relatively few beneficiaries and thus do not meet negotiation eligibility criteria, which are primarily based on a ranking of total spending. CONCLUSION: The IRA negotiation provisions will have limited impact on cancer drug prices and will likely leave most patients with cancer exposed to high drug costs.

Biosimilar Competition and Payments in Medicare: The Case of Trastuzumab.

PURPOSE: Numerous biologic drugs will soon be facing biosimilar competition. We study the case of trastuzumab, a revolutionary drug approved in 1998 to treat human epidermal growth factor receptor 2-positive breast cancer, to understand how trends in the price and treatment cost of the originator brand and biosimilar forms of trastuzumab evolved following biosimilar entry. METHODS: We use average sales price data from the Centers for Medicare and Medicaid Services, adjusted for inflation to real 2020 dollars using the consumer price index, to describe price changes for the originator biologic and biosimilar versions of trastuzumab between 2019, when the first biosimilar was covered by Medicare, and 2022, when a total of five biosimilar competitors were on the market. We also estimate total treatment costs of biologic and biosimilar forms of trastuzumab from 2005 to 2022 and describe changes in their market share. RESULTS: We find that the first biosimilar entrant's price was 15% lower than the originator brand in 2019, and the fifth biosimilar entrant's price in 2022 was 58% lower than the originator brand in 2019. Contrary to expectations from prior research, the originator biologic price in 2022 decreased 29% from its 2019 average sales price. Average treatment cost for the biologic and biosimilar versions of trastuzumab combined was $45,659 US dollars lower in 2022 compared with the year before biosimilar entry, 2018. Finally, biosimilar market share grew from only 7% in the first year of entry to 32% in the second year, when three biosimilars were on the market. CONCLUSION: Biosimilar entry may be an effective means of decreasing the cost of biologic cancer treatments. Our findings suggest that policies that support biosimilar entry and encourage use may expand access to necessary treatment and reduce health care costs.