How Will Drug Prices Be Affected By the Inflation Reduction Act?

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President Joe Biden is on track to sign the Inflation Reduction Act into law next week, which includes several provisions that empower Medicare to negotiate drug prices with pharmaceutical companies.

The pharmaceutical industry, which spent over $142 million on lobbying efforts to combat the Democrats' legislation, will be required to cap out-of-pocket prescription costs for seniors and people with disabilities enrolled in Medicare at $2,000 a year. The U.S. Department of Health and Human Services (HHS) will also begin negotiating prices for the top 10 medications by total Medicare expenditures in 2026, rising to 20 in 2029.

Other key revisions include removing co-pay costs for vaccines and restricting drug price increases to the rate of inflation. Pharmaceutical companies that don't comply with the new drug pricing measures will be subject to a 95% sales tax.

Outlets across the spectrum noted that the Inflation Reduction Act represents a "rare" defeat for the pharmaceutical industry. Some reports highlighted how Biden's reconciliation bill wouldn't cover the insulin co-pay cap for the seven million patients with private insurance.

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Cost relief may be coming for Medicare recipients who use insulin. But a proposed $35 monthly cap for those with private insurance is no longer part of the Senate’s Inflation Relief Act, which goes before the House on Friday.

The cost of insulin, which is used by people with diabetes to control their blood sugar, has become a political issue, with politicians like Vermont Sen. Bernie Sanders decrying how much Americans pay compared to people in other countries.

High drug and health care costs continue to prevent millions of Americans from achieving full health. Nearly 1 in 2 American adults report difficulty affording health care costs. It’s no wonder that voters consistently rank bringing down prescription drug prices and other measures to reduce the cost of care as among Congress’ top priorities.

Medicare is poised to renegotiate the prices of some of its most expensive drugs through a historic expansion of its power, which could reduce costs for many seniors as well as federal spending on its prescription drug plan.

The changes are tucked inside a massive spending-and-tax bill in Congress that includes $433 billion in investments in health-care and clean energy. House Democrats passed the Inflation Reduction Act on Friday in a 220 to 207 vote along party lines, ending a tortured legislative process that took more than a year.