Inflation Reduction Act

On August 16, 2022, the Inflation Reduction Act was signed into law by President Joe Biden. This law is lauded as a major victory for patients, and seniors with Medicare Part D, but careful inspection reveals a different reality. The bill doesn’t come close to helping even 5% of the 49 million Americans who rely on Medicare Part D for their health. It does nothing to assist seniors who don’t have Parts B or D. There are also major problems facing seniors that the Inflation Reduction Act not only doesn’t address, but makes worse.

Claim vs Fact

CLAIM: The White House Says: The Inflation Reduction Act will help all Medicare Part D seniors. FACT: This law comes nowhere close to helping all seniors

CLAIM: This law introduces sweeping Medicare reform that will help seniors immediately FACT: This law is narrow in scope, doesn’t actually begin for years, and makes minimal contributions to Medicare

  • This bill only negotiates drug prices for 10 drugs and only for Medicare Part D beneficiaries – if you don’t have Part D, you don’t see the benefits
  • The Part D provisions reduce the deficit by $265 billion, but reinvest less than 10% ($25 billion) back into Medicare Part D – people buying electric vehicles get more relief than seniors
  • The $2,000 out-of-pocket cap doesn’t begin until 2025 and drug price negotiation doesn’t begin until 2026

CLAIM: The bill won’t threaten new and better treatments FACT: “[The] CBO did not predict what kind of drugs would be affected or analyze the effects of forgone innovation on public health”

Inflation Reduction Act and the PBM Blindspot

On top of its narrow scope and marginal reach, the Inflation Reduction Act neglects one key issue that affects all patients: Pharmacy Benefit Managers (PBMs). PBMs purchase drugs from manufacturers at a negotiated rate and then sell those same drugs to pharmacies. What can result is a practice known as ‘spread pricing’ where the PBM sells the drug to the pharmacy at a higher price than what they paid to the manufacturer. While spread pricing is generally viewed as unscrupulous, it is allowed to occur due to the lack of transparency in these negotiations and gag orders placed on pharmacies. PBMs are merging with the very insurers they represent, contributing to increased prices at the pharmacy counter  and suing the Federal Government to keep their practices hidden.

PBMs are only mentioned five times in the entire 755 page bill and not in any context that would address the problem. The legislation delays implementation of the ‘rebate rule’ until 2032 at the earliest, after already delaying its start since January of 2022. The rebate rule would have provided direct and noticeable relief for seniors at the pharmacy counter by implementing protections for point-of-sale price reductions and flat-rate PBM fees not tied to the price of a drug. Congress had a tremendous chance to address a bipartisan and bicameral issue, but instead missed the mark entirely.