Prescription Drug Benefits

The U.S. has a number of policies related to drug pricing, affordability, and availability. To encourage manufacturers to innovate with new therapies, patent policy rewards the creation of new branded medicines. As those patents come to an end, generic drug manufacturers may enter a market and seek to sell their products at lower prices than the competing brand drugs.

Biosimilars provide competition for biologics, which account for a significant and growing portion of Medicare Part B drug spending. This report evaluates the current state of biosimilar competition in Medicare Part B and explores opportunities to achieve further savings.

The Inflation Reduction Act (IRA) changes the way Medicare pays for prescription drugs. These changes will impact various stakeholders, including Medicare, Medicare enrollees, drug manufacturers, and others.

The Centers for Medicare & Medicaid Services (CMS) Innovation Center is in the process of developing the Medicare $2 Drug List (M2DL) Model. This would allow Part D plan sponsors to offer a standardized list of generic drugs for a copayment of $2 or less for a month’s supply that would not be subject to prior authorization, quantity limits, or other utilization management restrictions.

Prescription drug prices are a top concern for policymakers and the public, but little data is available on prescription drug prices or other costs that contribute to premiums for commercial drug coverage.

In November 2024, the Centers for Medicare & Medicaid Services (CMS) released the Medicare Program; Contract Year 2026 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly proposed rule.

The Inflation Reduction Act established a limit on out-of-pocket spending (“the 2024 cap”) for enrollees with very high prescription drug spending in Medicare Part D, for the first time in the history of the program.

The cost of bringing a medical product to the U.S. market has been increasing and clinical trials constitute a large portion of these costs. In drug development, the clinical phase lasts an average of around 95 months compared to 31 months for the non-clinical phase and accounts for 69 percent of overall R&D costs (DiMasi, et al., 2016).

The Inflation Reduction Act (IRA) makes improvements to Medicare to increase accessibility and affordability of prescription drugs for Medicare enrollees, reduce the rate of growth in Medicare drug spending, and improve the financial sustainability of the Medicare program.

Effective January 1, 2023, the Inflation Reduction Act (IRA) eliminated cost sharing and deductibles for adult vaccines recommended by the Advisory Committee on Immunization Practices (ACIP) covered under Medicare Part D. In 2023, 10.3 million Medicare Part D enrollees received a recommended vaccine free of charge, which saved enrollees more than $400 million in out-of-pocket costs.