How could the Inflation Reduction Act influence cancer drug pricing?
In this opinion piece, Gilberto Lopes (Sylvester Comprehensive Cancer at the University of Miami, FL, USA) discusses barriers that can lead to inequities in cancer care and the role of financial toxicity in cancer care decision-making. Gilberto highlights policy interventions, such as the Inflation Reduction Act, which could help lower cancer medication costs in the USA and Medicare’s new ability to negotiate drug prices.
What is driving inequities in cancer medicine access in North America?
Inequities in cancer medicine access within the U.S. are driven by several factors, including socioeconomic status, race/ethnicity, geographic location and insurance coverage. These disparities mean that patients with lower incomes, racial/ethnic minorities and those living in rural areas often experience significant barriers to accessing timely and effective cancer treatments, including high-cost medications.
Access to cancer care is also largely dependent what type of insurance a patient has. Those with public insurance, such as Medicaid, may face restricted formularies or prior authorization requirements, while uninsured patients may forgo treatment altogether due to the prohibitive costs, especially for copays and other related expenses.
Socioeconomic factors also influence inequities, with patients from lower-income households facing higher out-of-pocket costs, which in turn creates financial barriers to accessing medications. This is compounded by the high cost of cancer drugs in the U.S., which is substantially higher than in other high-income countries.
Furthermore, racial and ethnic disparities exist. For example, , including newer targeted therapies and immunotherapies, compared to White patients. Paired with language barriers and healthcare provider bias, this contributes to care inequities.
Lastly, geographic location can impact cancer care access, as patients in rural or underserved areas often face additional barriers, such as limited access to specialized oncologists, cancer centers or clinical trials offering the latest treatments.
What role does financial toxicity play in cancer care decision-making?
Financial toxicity, which refers to the distress or hardship experienced by cancer patients due to high medical costs, has a significant impact on decision-making in several ways. Many patients opt for less expensive but potentially less effective treatment options due to high out-of-pocket costs, which can lead to worse health outcomes.
Financial toxicity can also be a barrier to medication adherence as it is associated with patients skipping doses, reducing their dosage or delaying treatment to stretch their prescriptions, which in turn negatively affects the effectiveness of their treatment. Following on from this, some patients may delay or avoid seeking care altogether because of concerns about medical bills. This can lead to later-stage diagnoses and worse prognosis. Financial strain can also have a detrimental effect on a patient’s overall well-being, leading to anxiety, stress and reduced quality of life, which further impacts health outcomes.
What policies could lower cancer medication costs?
Several policy interventions could help bring cancer medication costs in the U.S. in line with those of other high-income countries. First, allowing Medicare and other public insurers to negotiate directly with pharmaceutical companies for lower drug prices, similar to practices in other countries, could significantly reduce costs. Next, international reference pricing, which benchmarks U.S. drug prices against prices in other high-income countries, could prevent prices from being inflated domestically. There is also the possibility of a shift towards value-based pricing, whereby the price of cancer drugs reflects their clinical benefit.
Looking at biosimilars, policies that facilitate competition and drive faster approvals in the generic and biosimilar markets could help drive down prices by allowing for the wider use of both. Additionally, setting limits on the maximum out-of-pocket costs patients face for cancer medications, particularly for those with public insurance plans, could reduce the financial burden on individual patients.
What aspects of Medicare’s ability to negotiate drug prices have changed and how is this evolving?
Historically, Medicare was prohibited from negotiating drug prices under the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which created Medicare Part D. This law, often referred to as the “non-interference clause,” barred Medicare from engaging in direct price negotiations with drug manufacturers, leaving the task to private insurance companies offering Medicare Part D plans. These insurers could negotiate rebates and discounts, but the absence of direct Medicare involvement limited the overall price reductions achieved, particularly for high-cost drugs.
As of 2024, Medicare’s ability to negotiate drug prices significantly expanded due to legislative changes, particularly through the Inflation Reduction Act, which President Biden signed in law by in August 2022. For the first time, the Inflation Reduction Act introduced provisions allowing Medicare to negotiate the prices of certain high-cost prescription drugs. This marks a major shift in U.S. healthcare policy, as before this legislation, Medicare was prohibited from directly negotiating drug prices with pharmaceutical companies.
Medicare’s new negotiation ability allows it to negotiate prices for a limited number of high-cost, brand-name drugs that lack generic or biosimilar competition. The focus is on drugs that account for a substantial portion of Medicare’s spending and that have been on the market for a certain number of years (typically 9 years for small-molecule drugs and 13 years for biologics).
The law is being phased in, with the first set of negotiated prices expected to take effect in 2026. In the initial phase, 10 drugs will be selected for negotiation and have lower prices in effect. Looking to 2027 and beyond, the number of drugs eligible for negotiation will increase, gradually expanding to 20 drugs by 2029. Medicare will focus on the most expensive drugs for its Part D prescription drug program initially, and later drugs under Part B (which covers those administered in clinical settings, such as chemotherapy).
Taking a closer look at the price negotiation process, the Centers for Medicare & Medicaid Services (CMS) will negotiate with drug manufacturers. The final negotiated price will be based on several factors, including the drug’s clinical benefit, research and development costs, production and distribution expenses, comparative effectiveness and impact on patients’ quality of life.
Pharmaceutical companies that refuse to negotiate or fail to reach an agreement with CMS will face steep penalties, including excise taxes on the sales of the drug in question, starting at 65% and escalating over time. This penalty should incentivize manufacturers to participate in the negotiation process.
How could the Inflation Reduction Act influence cancer drug pricing?
The ability of Medicare to negotiate prices has been lauded as a significant step toward reducing drug costs for both Medicare beneficiaries and the program itself, which spends billions annually on prescription drugs. Expected impacts include lower out-of-pocket costs for beneficiaries who use high-cost medications due to the reduced prices negotiated by Medicare and savings for the Medicare program (with the Congressional Budget Office (CBO) estimating almost $100 billion in federal savings over 10 years). By focusing on drugs that lack competition, the law may also encourage the development of generics and biosimilars, further driving down costs.
What are the limitations and challenges of the Inflation Reduction Act?
Whilst the Inflation Reduction Act marks significant progress in addressing high drug costs, there are several limitations to Medicare’s new negotiation authority. To start with, the number of drugs eligible for negotiation is initially small. As noted earlier, the Act will start with only 10 drugs in 2026, this will gradually increase over time and so in turn the impact on drug prices will be gradual. This also means that many high-cost drugs will not be subject to negotiations in the near future.
Additionally, drugs with generic or biosimilar competition are excluded from the negotiation process, even if they are still expensive for patients. New drugs (those on the market for fewer than 9 or 13 years) are also excluded, which limits the policy’s reach.
The pharmaceutical industry has also pushed back on Medicare’s new negotiation powers. Pharma opposition argues that the Act could stifle innovation by reducing incentives for investment in research and development. Therefore, it is possible that legal challenges or attempts to limit the scope of the policy could arise in the future.
It is also important to note the impact on the commercial market. Although, Medicare beneficiaries may benefit from negotiated prices, the law does not directly affect drug prices for people with private insurance, so the overall reduction in U.S. drug prices may end up being limited.
What could the future hold for cancer care access?
As the provisions of the Inflation Reduction Act are implemented, the impact of Medicare’s ability to negotiate drug prices will become clearer. Policymakers may explore expanding the scope of Medicare negotiations in the future, potentially allowing for a larger number of drugs to be negotiated or lowering prices across other areas of healthcare.
This new power is considered a significant shift in the U.S. healthcare landscape. The country has long been an outlier among high-income nations in not allowing its largest public health program to negotiate drug prices directly with manufacturers.
Interviewee profile:
Gilberto Lopes is medical director for international programs and associate director for the Sylvester Comprehensive Cancer Center at the University of Miami, chief of the medical oncology division and professor of clinical medicine at the Miller School of Medicine. He currently serves on the board of directors for the Union International for Cancer Control and as Editor-in-Chief for the American Society of Clinical Oncology’s JCO Global Oncology.
Lopes has published more than 250 papers and book chapters. In addition to delivering lectures globally, he has been instrumental in more than 150 studies and clinical trials covering breast, gastrointestinal, genitourinary and thoracic cancers. His clinical research work has led to several US FDA approvals, including for immunotherapies and targeted agents, such as pembrolizumab and pralsetinib. His other main areas of research interest are disparities, health economics, value, policy and access to cancer drugs and care in low and middle-income countries. His research has influenced policymakers on three continents.
In addition to his academic pursuits, Lopes has led several consulting activities in drug development and healthcare services. He is the co-founder of Biomab, a diagnostics and therapeutic company developing point-of-care tests for the detection and new target selection for the treatment of HPV-related cancers. He is also the leading scientific advisor for Lucence, a biotech company that has developed and commercialized cancer-related next-generation sequencing tests for prevention and treatment selection including detection of circulating tumor RNA in addition to DNA. Lopes was instrumental in obtaining Medicare reimbursement approval for its test, LiquidHALLMARK in 2023. Lopes also serves as a scientific advisor for Xilis, a biotech company, which is developing tumor micro-organospheres to guide therapy for patients with cancer. Proof-of-concept studies are now running, and results are expected in 2024. Finally, Lopes was the founding Chief Medical and Scientific Officer for the Oncoclinicas group, the largest oncology group in Latin America (and one of the largest in the world). With ownership and leadership from Goldman Sachs, the group’s IPO was completed successfully in August 2021 (Bovespa, Sao Paulo, Brazil). Dr. Lopes also provides consulting services for pharmaceutical and biotechnology companies.
The opinions expressed in this interview are those of the author and do not necessarily reflect the views of Oncology Central or Taylor & Francis Group.