Impact of US Inflation Reduction Act on EU Biotech Companies

In 2022, the Inflation Reduction Art (IRA) became US law with the aim to reduce drug costs. 

The implementation of this new law increases the complexity of the payer and reimbursement systems in the United States (US) market. This new landscape will present significant challenges to pharmaceutical and biotech companies in the European Union (EU) either doing business in the US market or planning to do so.
To learn more about the short- and long-term impact of the IRA for EU pharmaceutical and biotech companies, review the facts below and read Alira Health’s article “What EU Companies Need to Know about the U.S. Inflation Reduction Act” for more details. 

What is the IRA?

The IRA mandates that the Centers for Medicaid & Medicare Services (CMS) negotiate prices for a subset of drugs to reduce their costs. Medicare is the US federal government insurance program for the elderly and disabled adults which is administered by CMS, a federal agency.  Medicare includes, among other programs, outpatient medical insurance (Part B), and a program for pharmacy insurance (Part D), in which patients buy self-administered medications.

The IRA contains several impactful provisions for biotech companies.  

• The IRA allows CMS to negotiate the price for certain Part B and Part D high-prices drugs, beginning with ten Part D drugs which were announced in August 2023; new negotiated prices for these drugs will go into effect on January 1st, 2026.
• CMS penalizes drug manufacturers for raising prices faster than inflation on drugs sold under Medicare. 
• Part D drugs have a cost sharing limit. Starting in 2025, the out-of-pocket maximum for Medicare patients will be capped at $2,000 per year. For every dollar above the $2,000 maximum, manufacturers will be responsible for 20% of the cost. 
• CMS must hold new mandatory patient-focused listening sessions to evaluate how the selected drugs address unmet medical needs and the impact of selected drugs on specific populations.  

Pharmaceutical and biotech companies who either already do business in the US market or are planning to do so need to understand the complexities of the Inflation Reduction Act (IRA) and its impacts on them. Read the article “What EU Companies Need to Know about the U.S. Inflation Reduction Act” to learn more about the significance of the IRA and how to adapt your strategy to its financial and strategic impact.