The Inflation Reduction Act (IRA) of 2022 included several provisions intended to lower the costs of prescription drug prices for patients while also lowering prescription drug spending under the federal Medicare program. Medicare patients benefitted directly in a number of ways: monthly out-of-pocket cost caps on insulin, access to vaccines without cost sharing, expansion of the Low-Income Subsidy Program (Extra Help), Part D Benefit Redesign and out of pockets caps, and the Medicare Drug Price Negotiation Program, among others. Medicare patient annual out-of-pocket Medicare Part D cap spending on brand name drugs was capped at $3500 in 2024 and then to $2000 from 2025 onward.1
Medicare Drug Price Negotiation Program Impacts in Oncology Have Started
The IRA requires Medicare to review the drugs with the top 50 highest gross spending under Medicare Part D within the past 12 months, and to negotiate drug prices for Medicare within specific parameters. To qualify for negotiation, drugs must have been approved for at least 7 years (except for biologic agents, which are expected to have been approved for at least 11 years), and they must have no generic and biosimilar competition. The mandated schedule under the IRA is that Medicare shall establish negotiated prices for 10 Part D drugs in the first round (to be in effect starting January 1, 2026); for up to 15 more drugs in the second and third rounds (effective as of January 2027 and 2028, respectively), and up to 20 more drugs for each year after that.2 Final negotiated prices (Maximum Fair Prices [MFPs]) will remain in effect until the Center for Medicare & Medicaid Services (CMS) determines a generic or biosimilar to the branded product has a substantial presence in the market. After that point, the drug ceases to be a selected drug under the Medicare Drug Price Negotiation Program, and market forces from generics and biosimilars will continue to drive prices for that market.3
The first round (effective for 2026) included just 1 oncology-related medication, ibrutinib (Imbruvica). Starting in January 27, 4 more oncology-related drugs will be affected: acalabrutinib (Calquence), palbociclib (Ibrance), pomalidomide (Pomalyst), and enzalutamide (Xtandi). Predictions are that 4 more oncology-related drugs could be included in the third round for January 2028 implementation: pembrolizumab (Keytruda), romiplostim (Nplate), nivolumab (Opdivo), and atezolizumab (Tecentriq).4
Other Medicare programs and protections may create unintended complications or barriers to the intended IRA broad reduction of prices and drug utilization:
1. Coverage Changes Can Be Affected by Part D Protected Class Rules
Congress passed the Medicare Modernization Act in 2003, creating the Part D prescription drug benefit. The CMS then identified “6 protected classes” of therapeutic classes and required Part D plans to cover “all or substantially all drugs” within these 6 classes. One of those 6 protected classes is antineoplastic drugs, which includes many oral chemotherapy agents.5 Some of the drugs named for MFP pricing fall into the protected classes, so although the pricing may change, the drug itself will still likely remain on formulary with all other drugs for that treatment (examples include Calquence, Ibrance, Pomalyst, and Xtandi). Being included under universal coverage protection can be an advantage or disadvantage because drugs that may have been excluded from formulary coverage are required to be added to formularies when selected for MFP status.6
2. Loss of Exclusivity and Medicare Rebates Can Affect the Impact of the MFPs as a Tool for Change
The CMS qualification criteria for determining potential drugs for MFP negotiations creates complications for expected savings. CMS looks at drugs based upon gross spending, which could sharply reduce projected savings once the heavy discounts that Medicare drug plans receive are applied. The rapidity by which generics and biosimilars are being developed could lead to an MFP-negotiated drug being removed from the program within just a few years after being added, reducing the projected impact of the program.
Impact on Oncology Practices Under the IRA Program
Shift of Medical Care Access to Higher-Cost Facilities—While patients received savings benefits of out-of-pocket caps from the onset of the IRA program, oncology practices will see the impact starting with the first MFP pricing implementation starting January 1, 2026. With even just 1 drug (Imbruvica) on the 2026 list, practices can quantify the impact on both pricing and reimbursement. Hospital-owned cancer facilities will likely have significant cost advantages from 340B pricing program discounts that independent physician practices cannot achieve.
Acquisition and overhead costs of the care delivery system for Part D and outpatient Part B drugs far outweigh the simple acquisition cost of the drug. As the MFP drives reimbursement rates downward, independent practices will continue to bear higher drug acquisition costs in addition to unreimbursed costs of inventory, accounts receivable, billing, utilization management, and staff to handle that continuing workload.
Studies by the Community Oncology Alliance and Avalere Health estimate that the financial implications and unreimbursed cost burdens on independent oncology practices could result in reductions of Part B reimbursement (since the MFP drugs will be outpatient-based treatments) could reach 49.1% for medical oncology/hematology providers.4 The MFP program focuses on allowed pricing from the manufacturers for selected drugs but forgets the varied site-of-care delivery models needed to administer that drug to the patient. A fixed reimbursement model from any payer, but especially Medicare, is quite likely to result in the costs of delivery of the medication to the patient (whether oral or infused in an outpatient setting) being higher than the reimbursement.
“My fear, and I have a lot of fear about this, [is] Congress didn’t intend for this to happen. They were not after the practices. They were not after the delivery system. They just thought, ‘Here’s a clever way we can negotiate drug prices lower.’” McAneny [Barbara McAneny, MD, FASCO, MACP, New Mexico Oncology Hematology Consultants] continued. “My concern is that as this rolls through—starting next year, we will start to see the decline in the margin that we get from the drugs that both in Part D and eventually B—practices will start to fail.”4
Loss of Patient Access to Lower-Cost Sites of Care, Treatment, and Medical Staff—If and when independent practices fail, it will not just be rural and underserved areas that are put into jeopardy. Countless patients could see their care displaced and funneled into more and more costly hospital systems—contradicting the IRAs ultimate goal of lowering healthcare costs for patients and Medicare.
This failure of the independent lower-cost site-of-care practice model is likely to be exacerbated if commercial payers start to embed MFP-related pricing into private insurance contracts as they embraced Medicare Average Sales Price (ASP) models when the ASP emerged.
Other Unintended Impacts to Patient Access as Drug Price and Formularies Change
Nonmedical decision-making—While many oncology products may benefit from being in a therapeutic protected class, others face increased competition from generics and biosimilars, arbitrary MFP pricing that falls below administration or operating costs, or formulary decisions by a Medicare Part C provider. Physicians prescribe treatment based on the individual patient’s needs, health status, and situation. When external forces lead to that prescribed drug not being available—and a payer expects a switch to a different product for reasons other than the patient’s medical need—that degree of nonmedical decision-making can create significant complications for the patient.
Generics or biosimilars may have the same or similar active ingredients, but the surrounding components may vary in ways that are incompatible with the patient’s needs. Supportive drugs intended to manage the severe side effects and complications of toxic cancer treatment cannot help the patient if they do not deliver the same impact as the branded product that was prescribed. I know from personal experience that generic versions of 24-hour Claritin wear off in 20 to 22 hours. That may not seem significant for an allergy product, but if the alternative to a brand was managing nausea or chronic pain for a cancer patient, that could severely and adversely affect their treatment journey, comfort, and quality of care. Pricing or formulary decisions that force a physician or patient to resort to an alternative product instead of the prescribed brand could well lead to higher costs of care should there be adverse delays or complications.
What Can Community Cancer Practices Do in the Face of Adverse Consequences From the IRA MFPs?
- Analyze and understand your operational costs and margins on a very detailed line-item level
- Review the MFP drugs for 2026, 2027, and possible 2028. Understand your volume, your patient population and needs, and the impact on your patients should you feel that site-of-care shifts or choice of prescription may be required in some way due to the IRA and MFP programs
- Communicate that impact on your patients directly to your congressional representatives, or in collaboration with your state professional societies, or national organizations, including the Community Oncology Alliance, American Society of Clinical Oncology, or other networks
- Plan to manage any incoming disruptions to the care you are able to provide to your patients, but quantify such disruptions and communicate that information to Medicare, Congress, and your local payers and business communities before MFP is adopted blindly by those who do not understand the complications
Other Next Steps for Our Own Organizations
- Review the drugs you use most often and build a profile of how each might be positively or adversely affected by an MFP mandate, protected class status, or imminent loss of exclusivity. Develop a strategy for managing patient care under any or all of these drivers, and clarify what choices and recommendations you would make for your patients and their optimal care needs. Identify when and why certain patients should remain on branded therapy despite pricing and formulary attempts to drive nonmedical decision-making alternative choices
- Spread the word to federal, state, and local legislators, employers, and payers about the risks and opportunity costs of blindly adopting Medicare policy changes, and the unanticipated consequences of universal MFP or loss of exclusivity policies—for both patient access and care as well as the impact on costs of care should shifts occur
- Comment on and address federal and state legislation and policy that may have a positive or adverse impact on the impact of patient access, care, coverage, and policies
Share your thoughts and experiences with me at [email protected]. I would be interested in hearing what you have found, done, or what more you want to know. I can provide additional resources on this topic if you wish.
References
- National Library of Medicine. The Inflation Reduction Act of 2022: One Year Anniversary Highlights from ASPE Drug Pricing Reports. August 16, 2023, www.ncbi.nlm.nih.gov/books/NBK616490/
- US Department of Health and Human Services. HHS Selects the First Drugs for Medicare Drug Price Negotiation. Press Release. August 29, 2023. www.hhs.gov/about/news/2023/08/29/hhs-selects-the-first-drugs-for-medicare-drug-price-negotiation.html
- Girvan G. To Lower Prices, Medicare Should Negotiate Drugs with the Longest Remaining Exclusivity. The Foundation for Research on Equal Opportunity. freopp.org/whitepapers/to-lower-prices-medicare-should-negotiate-drugs-with-the-longest-remaining-exclusivity/
- Shaw ML. Community Oncology Bracing for IRA Impact. Community Oncology Alliance. May 31, 2025. www.ajmc.com/view/community-oncology-bracing-for-ira-impact
- American Cancer Society Cancer Action Network. Medicare’s Six Protected Classes Explained. Fact Sheet. July 20, 2018. www.fightcancer.org/sites/default/files/Medicare%20Six%20Protected%20
Classes%20Fact%20Sheet%2007202018.pdf - Simenc D, Klaisner J, Holcomb K. Medicare price negotiation: Year 2 selection expands to new therapeutic areas. Milliman Maximum Fair Price (MFP) Issue Brief 3. February 7, 2025, www.milliman.com/en/insight/medicare-price-negotiation-year-2-selection-expands-therapeutic-areas
The Inflation Reduction Act (IRA) of 2022 included several provisions intended to lower the costs of prescription drug prices for patients while also lowering prescription drug spending under the federal Medicare program. Medicare patients benefitted directly in a number of ways: monthly out-of-pocket cost caps on insulin, access to vaccines without cost sharing, expansion of the Low-Income Subsidy Program (Extra Help), Part D Benefit Redesign and out of pockets caps, and the Medicare Drug Price Negotiation Program, among others. Medicare patient annual out-of-pocket Medicare Part D cap spending on brand name drugs was capped at $3500 in 2024 and then to $2000 from 2025 onward.1
Medicare Drug Price Negotiation Program Impacts in Oncology Have Started
The IRA requires Medicare to review the drugs with the top 50 highest gross spending under Medicare Part D within the past 12 months, and to negotiate drug prices for Medicare within specific parameters. To qualify for negotiation, drugs must have been approved for at least 7 years (except for biologic agents, which are expected to have been approved for at least 11 years), and they must have no generic and biosimilar competition. The mandated schedule under the IRA is that Medicare shall establish negotiated prices for 10 Part D drugs in the first round (to be in effect starting January 1, 2026); for up to 15 more drugs in the second and third rounds (effective as of January 2027 and 2028, respectively), and up to 20 more drugs for each year after that.2 Final negotiated prices (Maximum Fair Prices [MFPs]) will remain in effect until the Center for Medicare & Medicaid Services (CMS) determines a generic or biosimilar to the branded product has a substantial presence in the market. After that point, the drug ceases to be a selected drug under the Medicare Drug Price Negotiation Program, and market forces from generics and biosimilars will continue to drive prices for that market.3
The first round (effective for 2026) included just 1 oncology-related medication, ibrutinib (Imbruvica). Starting in January 27, 4 more oncology-related drugs will be affected: acalabrutinib (Calquence), palbociclib (Ibrance), pomalidomide (Pomalyst), and enzalutamide (Xtandi). Predictions are that 4 more oncology-related drugs could be included in the third round for January 2028 implementation: pembrolizumab (Keytruda), romiplostim (Nplate), nivolumab (Opdivo), and atezolizumab (Tecentriq).4
Other Medicare programs and protections may create unintended complications or barriers to the intended IRA broad reduction of prices and drug utilization:
1. Coverage Changes Can Be Affected by Part D Protected Class Rules
Congress passed the Medicare Modernization Act in 2003, creating the Part D prescription drug benefit. The CMS then identified “6 protected classes” of therapeutic classes and required Part D plans to cover “all or substantially all drugs” within these 6 classes. One of those 6 protected classes is antineoplastic drugs, which includes many oral chemotherapy agents.5 Some of the drugs named for MFP pricing fall into the protected classes, so although the pricing may change, the drug itself will still likely remain on formulary with all other drugs for that treatment (examples include Calquence, Ibrance, Pomalyst, and Xtandi). Being included under universal coverage protection can be an advantage or disadvantage because drugs that may have been excluded from formulary coverage are required to be added to formularies when selected for MFP status.6
2. Loss of Exclusivity and Medicare Rebates Can Affect the Impact of the MFPs as a Tool for Change
The CMS qualification criteria for determining potential drugs for MFP negotiations creates complications for expected savings. CMS looks at drugs based upon gross spending, which could sharply reduce projected savings once the heavy discounts that Medicare drug plans receive are applied. The rapidity by which generics and biosimilars are being developed could lead to an MFP-negotiated drug being removed from the program within just a few years after being added, reducing the projected impact of the program.
Impact on Oncology Practices Under the IRA Program
Shift of Medical Care Access to Higher-Cost Facilities—While patients received savings benefits of out-of-pocket caps from the onset of the IRA program, oncology practices will see the impact starting with the first MFP pricing implementation starting January 1, 2026. With even just 1 drug (Imbruvica) on the 2026 list, practices can quantify the impact on both pricing and reimbursement. Hospital-owned cancer facilities will likely have significant cost advantages from 340B pricing program discounts that independent physician practices cannot achieve.
Acquisition and overhead costs of the care delivery system for Part D and outpatient Part B drugs far outweigh the simple acquisition cost of the drug. As the MFP drives reimbursement rates downward, independent practices will continue to bear higher drug acquisition costs in addition to unreimbursed costs of inventory, accounts receivable, billing, utilization management, and staff to handle that continuing workload.
Studies by the Community Oncology Alliance and Avalere Health estimate that the financial implications and unreimbursed cost burdens on independent oncology practices could result in reductions of Part B reimbursement (since the MFP drugs will be outpatient-based treatments) could reach 49.1% for medical oncology/hematology providers.4 The MFP program focuses on allowed pricing from the manufacturers for selected drugs but forgets the varied site-of-care delivery models needed to administer that drug to the patient. A fixed reimbursement model from any payer, but especially Medicare, is quite likely to result in the costs of delivery of the medication to the patient (whether oral or infused in an outpatient setting) being higher than the reimbursement.
“My fear, and I have a lot of fear about this, [is] Congress didn’t intend for this to happen. They were not after the practices. They were not after the delivery system. They just thought, ‘Here’s a clever way we can negotiate drug prices lower.’” McAneny [Barbara McAneny, MD, FASCO, MACP, New Mexico Oncology Hematology Consultants] continued. “My concern is that as this rolls through—starting next year, we will start to see the decline in the margin that we get from the drugs that both in Part D and eventually B—practices will start to fail.”4
Loss of Patient Access to Lower-Cost Sites of Care, Treatment, and Medical Staff—If and when independent practices fail, it will not just be rural and underserved areas that are put into jeopardy. Countless patients could see their care displaced and funneled into more and more costly hospital systems—contradicting the IRAs ultimate goal of lowering healthcare costs for patients and Medicare.
This failure of the independent lower-cost site-of-care practice model is likely to be exacerbated if commercial payers start to embed MFP-related pricing into private insurance contracts as they embraced Medicare Average Sales Price (ASP) models when the ASP emerged.
Other Unintended Impacts to Patient Access as Drug Price and Formularies Change
Nonmedical decision-making—While many oncology products may benefit from being in a therapeutic protected class, others face increased competition from generics and biosimilars, arbitrary MFP pricing that falls below administration or operating costs, or formulary decisions by a Medicare Part C provider. Physicians prescribe treatment based on the individual patient’s needs, health status, and situation. When external forces lead to that prescribed drug not being available—and a payer expects a switch to a different product for reasons other than the patient’s medical need—that degree of nonmedical decision-making can create significant complications for the patient.
Generics or biosimilars may have the same or similar active ingredients, but the surrounding components may vary in ways that are incompatible with the patient’s needs. Supportive drugs intended to manage the severe side effects and complications of toxic cancer treatment cannot help the patient if they do not deliver the same impact as the branded product that was prescribed. I know from personal experience that generic versions of 24-hour Claritin wear off in 20 to 22 hours. That may not seem significant for an allergy product, but if the alternative to a brand was managing nausea or chronic pain for a cancer patient, that could severely and adversely affect their treatment journey, comfort, and quality of care. Pricing or formulary decisions that force a physician or patient to resort to an alternative product instead of the prescribed brand could well lead to higher costs of care should there be adverse delays or complications.
What Can Community Cancer Practices Do in the Face of Adverse Consequences From the IRA MFPs?
- Analyze and understand your operational costs and margins on a very detailed line-item level
- Review the MFP drugs for 2026, 2027, and possible 2028. Understand your volume, your patient population and needs, and the impact on your patients should you feel that site-of-care shifts or choice of prescription may be required in some way due to the IRA and MFP programs
- Communicate that impact on your patients directly to your congressional representatives, or in collaboration with your state professional societies, or national organizations, including the Community Oncology Alliance, American Society of Clinical Oncology, or other networks
- Plan to manage any incoming disruptions to the care you are able to provide to your patients, but quantify such disruptions and communicate that information to Medicare, Congress, and your local payers and business communities before MFP is adopted blindly by those who do not understand the complications
Other Next Steps for Our Own Organizations
- Review the drugs you use most often and build a profile of how each might be positively or adversely affected by an MFP mandate, protected class status, or imminent loss of exclusivity. Develop a strategy for managing patient care under any or all of these drivers, and clarify what choices and recommendations you would make for your patients and their optimal care needs. Identify when and why certain patients should remain on branded therapy despite pricing and formulary attempts to drive nonmedical decision-making alternative choices
- Spread the word to federal, state, and local legislators, employers, and payers about the risks and opportunity costs of blindly adopting Medicare policy changes, and the unanticipated consequences of universal MFP or loss of exclusivity policies—for both patient access and care as well as the impact on costs of care should shifts occur
- Comment on and address federal and state legislation and policy that may have a positive or adverse impact on the impact of patient access, care, coverage, and policies
Share your thoughts and experiences with me at [email protected]. I would be interested in hearing what you have found, done, or what more you want to know. I can provide additional resources on this topic if you wish.
References
- National Library of Medicine. The Inflation Reduction Act of 2022: One Year Anniversary Highlights from ASPE Drug Pricing Reports. August 16, 2023, www.ncbi.nlm.nih.gov/books/NBK616490/
- US Department of Health and Human Services. HHS Selects the First Drugs for Medicare Drug Price Negotiation. Press Release. August 29, 2023. www.hhs.gov/about/news/2023/08/29/hhs-selects-the-first-drugs-for-medicare-drug-price-negotiation.html
- Girvan G. To Lower Prices, Medicare Should Negotiate Drugs with the Longest Remaining Exclusivity. The Foundation for Research on Equal Opportunity. freopp.org/whitepapers/to-lower-prices-medicare-should-negotiate-drugs-with-the-longest-remaining-exclusivity/
- Shaw ML. Community Oncology Bracing for IRA Impact. Community Oncology Alliance. May 31, 2025. www.ajmc.com/view/community-oncology-bracing-for-ira-impact
- American Cancer Society Cancer Action Network. Medicare’s Six Protected Classes Explained. Fact Sheet. July 20, 2018. www.fightcancer.org/sites/default/files/Medicare%20Six%20Protected%20
Classes%20Fact%20Sheet%2007202018.pdf - Simenc D, Klaisner J, Holcomb K. Medicare price negotiation: Year 2 selection expands to new therapeutic areas. Milliman Maximum Fair Price (MFP) Issue Brief 3. February 7, 2025, www.milliman.com/en/insight/medicare-price-negotiation-year-2-selection-expands-therapeutic-areas
