The law current states that during the plan years of 2023, 2024, and 2025, the out of pocket costs for insulin will be $35.
During the following years, it states that it will be the lesser of the following three pricing situations: (1) $35, (2) equal to 25%
of the maximum fair price established for the covered insulin product (likely medicare's best price as established by the
Medicare Drug Rebate Program (MDRP) or (3) an amount equal to 25 percent of the negotiated price of the covered insulin
product under the prescription drug plan or MA-PD plan. Excerpt adapted from H.R. 5376
Relevant Stakeholders and Potential Contracts
In the healthcare delivery ecosystem, out-of-pocket costs do not directly impact the pharmaceutical manufacturers or the healthcare providers who procure the medicines. Instead, the financial risk-sharing effects the bottom-line of health insurance companies (in the case of Medicare Advantage) and Medicare. Due to these two types of instutions being the financial risk-barers in this situation at first, they may seek retrospective rebates from pharmaceutical manufacturers to offset this loss and perturb access to other medical products and services for their beneficiaries. To reach the potential rebates that work to offset the financial impact to public and private insurers, a budget impact analysis would need to be conducted on a per organization basis. Given the high costs of premiums, it is likely that the insurers will be able to incur this cost and should not need to defer costs back onto patients through commercial plans like employer-funded plans, health exchange plans, and medicare advantage plans.
Healthcare Delivery
It is important to not that the implementation of the Inflation Reduction Act has not been fully assessed in different stakeholder groups. Retailers are large-scale procurers of medicines like insulins and are the most critical group to delve into in this case. If we take Walgreens, for example, it works with multiple insurers and distributors that instead remove them from direct interaction with manufacturers. In contrast, CVS Health vertically integrated to add healthcare insurance capabilities (Aetna) and therefore has more direct contact with manufacturers. Again, specific rebates for the IRA have not been implemented, but would be seen through changes in average sales price (ASP) or Medicare Best Price.
Finding a Middle Ground
As previously mentioned, a budget impact model to health insurers would help define whether financial risk sharing is required. Analysis of this topic concludes that no other stakeholder group along the value chain should require a rebate either. Therefore, the financial impact to pharmaceutical manufacturers would not be more than the Medicare Negotiation Program. Considering the use of multi-source generics, there is no critical impact to one company.