Inflation Reduction Act (IRA) provisions allow Medicare to defer price negotiations for drugs expecting biosimilar competition within two years of selection. According to new CEVR research, this may unintentionally reduce long-term savings.
In new research published in Health Affairs Scholar, CEVR’s Molly Beinfeld, Priyanka Ghule, Fariel LaMountain, and James Chambers modeled three scenarios, using ustekinumab (Stelara) as a case study:
- Savings from biosimilar competition alone for ustekinumab;
- Savings from IRA negotiations alone for ustekinumab, assuming no biosimilar competition;
- Savings if Medicare negotiated a price for palbociclib (Ibrance), a drug not nearing loss of exclusivity, instead of ustekinumab plus savings due to ustekinumab biosimilar competition.
Scenarios 1 and 2 could produce annual savings of up to $2.3 billion and $1.7 billion, respectively, for ustekinumab by year five; Scenario 3 savings could reach up to $3.5 billion by year five.
Our research suggests that Medicare could achieve greater savings from clearer criteria on when to defer negotiation due to biosimilar competition, while ensuring strong incentives for the biosimilar market.
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