Americans were promised the Inflation Reduction Act (IRA) would lower drug prices. Instead, it increased premiums and out-of-pocket costs while exacerbating drug shortages. Rather than getting less expensive medications, patients are forced to fight each other for access to treatment.
In January of this year, the Department of Health & Human Services (HHS) released a new list of 15 more drugs selected for price setting under the law. Now, HHS has trained its sights on a new target: cancer patients. The list includes four key cancer drugs – Xtandi, Pomalyst, Ibrance, and Calquence – used to treat prostate cancer, multiple myeloma, breast cancer, and leukemia. The announcement couldn’t come at a worse time, as our country deals with drug shortages and skyrocketing cancer rates.
Growing Cancer Rates, Fewer Treatments, Less Hope
While the IRA is focused on Medicare – for now – its impact is felt by patients of all ages. By allowing the government to dictate drug prices, the IRA disincentivizes manufacturers from producing critical cancer drugs. Two dozen companies have announced that they are reducing or stopping research and development on new drugs and secondary uses for existing medications due to incentives and penalties that discourage the research and development of costly medicines for diseases such as cancer. Every expert – from the Congressional Budget Office to private academics – says the law will result in fewer treatments and cures. The University of Chicago estimates that government price controls will lead to as many as 342 fewer new drugs.
Why is this important? Increasingly, people – especially women – under age 50 are receiving a cancer diagnosis. Childhood cancer rates in America have increased by about 33% since 1975. When fewer new therapies are developed because of the IRA’s policies, it doesn’t just hurt Medicare patients; it impacts cancer patients of all ages who are counting on future treatments.
Hard to Swallow
The IRA’s penalties and incentives are also driving investment away from small molecule drugs, like oral Oncolytics, and into biologics, such as injections or infusions. Under the law, pills are subject to price controls 9 years after FDA approval, while biologics are subject to price limits after 13 years. As a result, small molecule funding has dropped by 70% since the IRA was introduced. According to Vital Transformation, “Through the first seven months of 2024, biologics funding is now 10 times larger than small molecules, despite small molecules being the most common and convenient treatment options for patients”. Small molecules have a much lower incremental cost than biologics (a median of $4,738 compared with $16,020 for biologics). Patients most often also have to pay a hospital or physician a fee to administer a biologic, where costs are much higher. One study found that hospital prices for the top 37 infused cancer drugs were 86.2% more per unit than in physician offices. Another study showed that hospitals charged 118% more than specialty pharmacies for the same drugs. Finally, patients must pay the doctor to actually administer the drug, a cost on top of the drug itself that is typically much more than a dispensing fee at a pharmacy. Patients typically pay 20% cost sharing all these higher costs, making care less accessible for lower income people.
What this all means is that the law is driving the development of more expensive products delivered to patients in more expensive settings. In the long term, Medicare costs will be higher than if the IRA pill penalty had never existed.
Oral therapies are often easier for patients to take and can dramatically improve quality of life, particularly for rural and underserved populations. Reduced innovation in this space means fewer convenient, accessible cancer treatments. Ask any cancer patient if they’d rather take a pill at home or sit in an infusion chair for hours taking their medicine. It’s easy to understand but hard for patients to swallow.
Where are All the Drugs?
The need for reliable access to cancer treatments has never been greater. Currently, the Food and Drug Administration lists eight oncology drugs in shortage. Two drugs listed as “currently in shortage” are for breast and leukemia – the same cancers Ibrance and Calquence treat. The government’s decision to target two drugs that treat cancers that are already experiencing a drug shortage makes little sense.
Breast cancer is the second most common cancer in women in the United States. The American Cancer Society (ACS) estimates that about 316,950 new cases of invasive breast cancer will be diagnosed in women this year. Half of the women who will be diagnosed will be 62 years or younger. ACS also predicts there will be about 23,690 new cases of chronic lymphocytic leukemia (CLL) diagnosed this year. CLL is one of the most common leukemias in the United States, accounting for about 1 in 3 new cases, with the number of leukemia cases increasing in adolescents.
At a time when cancer rates are climbing, the IRA’s policies risk making it even harder for the growing population of patients to get the treatment they need.
Cutting Doctors, Encouraging Consolidation
Additionally, the law changes how drugs administered in physician offices are paid. Instead of being reimbursed based on a drug’s Average Sales Price (the average price across all markets, net of price concessions; ASP) plus a small percentage (4.3%) for administrative and other costs, the IRA reimburses oncology clinics based on the “negotiated” price (Maximum Fair Price, or MFP, which is set by the government). Avalere estimates this could lead to a 50% reduction in add-on payments for Part B drugs, translating into $25 billion in cuts to doctors, $12 billion of which would hit oncologists.
While large oncology practices with purchasing clout may be able to buy drugs delivered to cancer patients below the average price, many cannot, meaning they could lose money on each drug they administer. We’re already seeing that as physicians have lost money, hospitals have bought up practices, and physicians have left communities.
For example, when ASP was adopted in 2005, more than half of all Medicare oncology claims were from doctors in the community. Today, more than half are from more expensive hospitals. Under current law, Medicare pays two to three times as much for hospital treatments than for doctor’s services.
Large, metropolitan hospitals may absorb these reimbursement cuts, but smaller oncology practices in rural areas will suffer and may close or join the consolidation trend by joining a hospital. Access to proper care will become even more difficult for cancer patients. Timely treatment can mean the difference between life and death. With IRA-induced shortages, the longer a patient waits to get the medications they need, the lower their chances of survival.
Curing the IRA Cancer
Congress must act to reverse course before more patients are harmed. Two key reforms should be prioritized. Passing the Ensuring Pathways to Innovative Cures (EPIC) Act would protect access to community oncology care by adjusting how Medicare reimburses physicians administering Part B drugs used to treat cancer. The EPIC Act will also preserve the financial viability of smaller clinics, allowing more patients to receive treatment closer to home.
Additionally, Senator John Barrasso’s (R-WY) previously introduced bill, the Protecting Patient Access to Cancer and Complex Therapies Act, would fix the ASP spillover, keeping physician payments fair and based on real prices, not government-set rates. Instead of relying on the government’s MFP, reimbursement is tied to the ASP. The price of oncology drugs would then better reflect real market dynamics and support continued access to treatments. The fix would ensure that reimbursement remains stable and that incentives to join higher cost settings are minimized.
These bills should be included in the budget reconciliation bill. The unintended consequences of the IRA are stifling innovation and creating economic pressures on doctors and patients, all while increasing costs for taxpayers and patients. The need for urgent reform is clear. The health and future of countless Americans depend on it.