I feel like I should apologize whenever I overindex on math, because a text newsletter is not a great vehicle for discussing arithmetic. Anyway: today is a day where I overindex on math. Sorry.
Unsurprisingly, I’m still focused on Thursday, the day when the government is reportedly going to announce the actual prices generated as a part of the IRA price-control process.
It’s a given that the headlines will all be on the discounts versus the existing list price. That’s the most dramatic way to display the data, and the Thursday announcement will be all about drama.
But the Politico article that broke the news about the Thursday announcement had an important line about other numbers that might be shared: “While it’s unclear how specific the officials will get, the government is expected to highlight the savings that patients can expect starting in 2026.”
That will be an interesting set of datapoints, because the answer to “how much will patients save?” is likely to be “not that much” or, at least, “it depends.”
Here’s the math.
In 2026, when the new prices roll out, there will already be a $2,000 out-of-pocket cap on spending in Medicare Part D. That’s a big deal on its own, and it clicks on fully in 2025. The cap is a bigger deal, if we’re being honest, than the “negotiated prices.”
What’s important to this analysis is that the cap puts a ceiling on how much savings price controls will deliver for seniors.
Here’s the underlying math**:
If any of the prices announced on Thursday are more than $470 a month (or $5,640 a year), patients aren’t going to save anything. $470 a month is exactly $2,000 a year, out of pocket. (Under the “standard benefit,” seniors pay a deductible, then 25% coinsurance of the remaining costs, up to $2,000 a year).
Enbrel, Stelera, and Imbruvica will almost certainly fall above the $2,000 cap. So patients on those meds won’t see any savings at all from price controls.***
On the flip side, there will almost certainly be savings on the other seven meds,**** where the government price will be below $470. But there’s a big asterisk.
That $470 number is calculated on patients who have the “standard benefit” with a deductible and 25% coinsurance. But not all patients have the “standard benefit.” Many have Part D plans or Medicare Advantage plans with a different structure that features copayments, not coinsurance. So their out-of-pocket costs may already be pretty low. Will price controls help those patients?
Probably not. Unless copayments are in excess of $50 a month (and that’s being incredibly conservative), the savings in 2026 under the “standard benefit” aren’t going to deliver any savings versus the existing copay. (And, indeed, those patients with copays may actually see their OOPs increase between 2025 and 2026 because of the way that the $2,000 cap is calculated.)
This is all a moving target. It may be that Medicare plans work to put patients in plans with different designs over the next couple of years, such as a shift from copay-heavy options to ones that track the standard benefit more closely.
And that’s not to suggest that no patients will benefit at all. Certainly, patients on plans following the standard benefit, taking highly rebated medicines such as Jardiance or Xarelto, will see some relief.
But the winners and losers here are not going to be evenly distributed, there won’t be a universal truth when it comes to patient impact, and none of this will be simple.
The announcement on Thursday will suggest otherwise. Be wary.
** For simplicity’s sake, I’m leaving out the whole meta-discussion about how all of this might impact premiums.
*** One important caveat: the government is absolutely going to save money on those medicines, and I don’t want that point to be lost. It’s just that the hullabaloo this week is going to frame this primarily as a win for seniors, which is not the most honest or accurate way to think about price controls.
**** Really, I’m talking about six medicines here. The seventh — a family of insulins that includes Novolog — is a special case, in part because there is already a $35/month OOP cap and partly because the net prices there are really, really low. Affordability for those medicine shouldn’t be a concern right now, and price controls in 2026 shouldn’t change that.
I’m a big fan of Mark Fendrick, who runs the indispensable University of Michigan Center for Value-Based Insurance Design. He had a Health Affairs Forefront piece yesterday making a couple of important points about the IRA. First, the government needs to do a much, much better job of talking about the “smoothing” program. And, second, CMS needs to step up to keep PBM shenanigans from undermining patient access with the new benefit design.
The Harvard PORTAL folks continue to beat the drum on patent policy, with yet another JAMA piece, this one on the frequency of “terminal disclaimers” on patents that might otherwise be rejected. The authors said their findings support more restrictive USPTO policies. I’m ignorant of the legal niceties, so I’m having a hard time figuring out if there is any causal link between terminal disclaimers and delayed generic entry.
Love that COA’s Ted Okon is beating the drum on the way that big, for-profit entities seem to be bleeding dollars out of the 340B program. It’s a conversation we need to be having, and I’m grateful to Ted for leading it.
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