Why the 'IRA Is Harmless' Narrative Misses the Mark

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Back in March, I spent some time detailing my worry that the media was going to get the narrative around the IRA wrong based on the first 10 medicines to get price controls. At the time, I predicted, “this is something that I’ll have to write over and over.”

So at the risk of repeating myself … 

The first 10 medicines to be subject to Medicare “negotiation” are not representative of the long-term effects of the IRA. It’s possible -- it’s even likely -- that there won’t be huge short-term repercussions for the companies that make those 10 medicines. This is not a particularly new or novel or controversial take. 

And yet we’re getting some earnings-season coverage that is treating the (expected) lack of immediate, cataclysmic impact as a sign that, eh, the IRA isn’t that bad and anyone who claims otherwise is being hyperbolic. It’s the thesis of this BioSpace piece that posits that industry is “unfazed” by price controls. FiercePharma covered much of the same ground last week.

(Quick aside: NPR also touched on this topic in this radio hit today. What was amazing -- and instructive -- is NPR used a clip from J&J to make the point that the first round of negotiations wouldn’t be so bad. Except … in the excerpt that NPR used, the executive wasn’t talking about price controls at all, but Part D redesign. I’m caught between sympathy for the reporter-- this stuff is hard -- and frustration that there’s not a better understanding of what’s going on.)

But this is a myopic way of looking at a government regime that is on track to set price controls on more than 100 drugs by the end of the decade. The first 10 medicines are not at all representative of the overall impact of the IRA for a couple of simple reasons. 

We’re dealing with medicines that are already hugely rebated. There simply isn’t much room for the government to take prices down any further. Right now, the net price of insulin is closing in on $20 a month. Can the government go much lower? 

The assumption is that the rebates on the oral diabetes meds that make up so much of the initial list of selected drugs are well over 50%, and falling. Again, how much more of a discount can the government possibly extract? 

Layered into this is the fact that analyst expectations have accounted for the potential hits. Companies aren’t projecting confidence because there won’t be any impact. They’re projecting confidence because the analysts have already accounted for governmental intervention and they don’t see a need to correct that accounting. 

And the first 10 medicines, by and large, are not successes because they’re priced high. They’re successes because the volumes are extraordinary. 

That combination -- healthy volume, already-low prices, factored-in expectations -- means that it’s unlikely that any price announcements in the next month will meaningfully change the game. (These are also, generally, medicines that are close to generic competition, which further drains the financial drama from these first 10 meds.)

Again: this is not new or novel or controversial. 

But look at the longer term and the impacts become more dramatic. Negotiations in the years to come are going to start to hit medicines that don’t have rebates (particularly infused Part B drugs) and medicines that are further from generic competition. And those effects are going to be far more negative.

And that’s the long-term trend that is going to shape decision-making. Companies are getting more explicit about what that might look like, highlighting modalities that will be prioritized (antibody-drug conjugates over small molecules) and drug-development tweaks (such as thinking twice about secondary indications for orphan drugs). 

Those are absolutely real effects driven by clear incentives in the IRA. Suggesting that the law is a nothingburger just because the first 10 prices CMS announces aren’t punitive misses most of the point. 

Of course, I fully expect that plenty of people will still miss that point. And I’ll keep countering. I don’t mind the repetition. 

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A quick caveat: not everyone is missing the point. Endpoints did a nice job with the duality of corporate perspectives. 

Also: BMS talked about the IRA quite a bit in its earnings call on Friday. I’m not excerpting it at length here, but it’s worth pulling up the transcript and ctrl-F-ing for “IRA.” 

Also Also: One of the analysts on the BMS call suggested that their prices could come down as soon as this week “ahead of the congressional recess.” I assume that’s pure speculation. Companies don’t have to finalize the process with CMS until Wednesday, and the House goes home on Thursday. 

If you have better perspective than I do, I’d love to hear it.

This is a great 340B “Viewpoint” from JAMA Health Forum. It does a couple of things well. 

First, it provides a good wrapup of why we’re talking about 340B at all, summarizing all the datapoints that show that 340B doesn’t appear to be improving care for low-income Americans. 

Second, it includes a radical -- but not unreasonable -- call for a change in 340B to connect discounts with specific patients, rather than providers, which would more precisely target the assistance that 340B provides and open up the benefits to any provider who treats a patient in need. 

Elsewhere:

• I don’t know what the Washington Post is driving at by asking women for their experience with the postpartum depression med from Sage. But this is one where insurance coverage hasn’t followed the science, so I’m hoping that whatever the Post does, it is at least partly in service of better access. 

• The Philadelphia Inquirer has a piece on the asthma market, outlining the ways in which a move to $35 inhalers has helped … and where major gaps remain. There’s not much new in the piece, but it underscores the continued resonance of the topic.

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