The Inflation Reduction Act alone won’t lower prescription drug costs

“Make no mistake,” President Biden told Congress in his State of The Union address this week, “if you try to do anything to raise the cost of prescription drugs, I will veto it.”  

His remarks follow years of sharp increases in prescription drug prices. This year, Pfizer alone hiked the price on 90 of its drugs — including two of its cancer treatments, which are now eight percent higher than they were in 2022. 

That’s unwelcome news for millions of Americans, many of whom are already struggling with high inflation. People are choosing between paying for essential medications and putting food on their tables. The Biden administration took steps last year to control runaway prescription drug costs as part of the Inflation Reduction Act (IRA). But many of the bill’s provisions fall short, and some are years away from helping Americans gain access to drugs at a reasonable cost. 

Americans spend more on prescription drugs than any other nation in the world. On average we pay $1,300 per year for these medications, and that’s on top of the rising costs of health insurance, which is outpacing wages across the country.  

A major reason prescription drugs are so expensive is the federal government has been on the sidelines in negotiating prices with pharmaceutical companies. Third-party pharmacy benefit managers (PBM) have historically played this role, working with health insurance plans to negotiate price discounts with drug companies.  

A 2019 U.S. Senate staff report claimed drug companies increase list prices to give larger rebates to PBMs in exchange for better placement on a health plan’s formulary. PBMs will face tough questions from both parties in Congress this year, and bipartisan legislation limiting their power over drug pricing has already been introduced in the U.S. Senate. 

Changes are on the way which should eventually help lower prescription drug costs — but they won’t be felt broadly anytime soon. The IRA gives the federal government the authority to negotiate costs for “some” drugs covered under Medicare, but many price reductions won’t take effect until 2026. The legislation also requires pharmaceutical companies to refund Medicare if prices rise faster than the rate of inflation, but it’s unclear how this will be tracked or enforced.  

More immediate price relief will occur for those who require insulin, but not everyone will benefit. For over a million eligible Medicare Part D users of the therapy, prices will now be capped at $35 per month. This will bring relief to these patients, but the price cap only applies to those on Medicare, which excludes 20 million others with private insurance. In his address this week, Biden called on Congress to make insulin available at $35 a month “for every American who needs it.”  

Further, the IRA doesn’t require Part D health plans to cover every type of insulin treatment on their formularies. Insurance companies may drop a patient’s preferred insulin delivery device if it’s deemed too expensive to cover. As those who take insulin know, it’s not just the therapy but the way it’s administered that can have a tremendous impact on a patient’s overall quality of life. The IRA doesn’t assure Medicare patients that the same insulin systems they’ve been using for years will be covered under the $35 monthly price model.  

A wave of private companies is now trying to disrupt the market by offering prescription medications at significantly lower prices. Amazon has launched a $5 per month subscription service for unlimited prescription medications for many common health conditions. Mark Cuban’s Cost Plus Drugs intends to bypass pharmaceutical “middlemen” and manufacture generic medications, which they claim will lower prices. Americans are hoping Cuban’s service will lower their prescription drug costs, evidenced by the fact that over 1.5 million people have already signed up for it. 

Amazon and Cuban aren’t pursuing these ventures because it’s the right thing to do. They’re doing it to make money, and when private companies see a financial upside to lowering prescription drug costs for consumers, it says everything about how truly broken our current system has become.  

President Biden should be applauded for doing more than any other president in recent history to try and address the issue of skyrocketing prescription drug prices. The Inflation Reduction Act is an important start — but the problem is nowhere close to being solved.  

Lawmakers must continue to push for faster reductions in prescription drug prices and create incentives for health insurers to cover the widest array of pharmaceutical options on their formularies. Then, and only then, will we have a strong reason to celebrate.  

Lyndon Haviland, DrPH, MPH, is a distinguished scholar at the CUNY School of Public Health and Health Policy.