How Does The Inflation Reduction Act Impact Healthcare?

The IRA will affect more than the climate!  Prescription drug costs have soared over the last few decades, and yesterday, August 16th, the most significant change was made to Medicare in almost a decade. For years, individuals were fighting for legislation that lowers the amount patients are paying for prescription drugs and limits out-of-pocket costs as well.

The bill has the potential to reduce costs in a few different ways.  Medicare officials have been given the power to negotiate with pharmaceutical companies. And the federal government will reduce costs of both health insurance and prescription drug prices by using subsidies.

In his recent NY Times article, David Leonhardt outlines the main provisions of the bill:

• The new law will help to curb the growing price of prescription drugs. It allows Medicare officials to negotiate over drug costs and give companies less freedom when setting high prices.
• The bill sets a $2,000 annual cap on the amount of money that any senior pays for drugs. After somebody hits that cap, a combination of the federal government, private insurers and drug companies will pay the remaining bills.
• The bill caps out-of-pocket insulin expenses at $35 a month for people in Medicare; many now pay more than $50 a month. The bill also makes adult vaccines free for both seniors and people in Medicaid, starting next year.

On the one hand, individuals feel that this change is long overdue. The counterpoint from the pharmaceutical industry has argued that these profit reductions will lead pharmaceutical companies to decrease spending on the development of future drugs, which will negatively impact the availability of promising treatments.

With this bill being a significant change for many, there is a lot of excitement around it. Nothing happens overnight and the IRA is no different, negotiated pricing won’t take effect until 2026.