The Inflation Reduction Act of 2022 (IRA) introduced the Medicare Drug Price Negotiation Program with the goal of lowering Medicare spending on medications. The IRA primarily targets Medicare but may have indirect implications for employment-based health plans and the use of prescription drugs. This Fast Fact closely examines workers’ current prescription drug utilization vs. drugs' initially approved usage and discusses the implications for employee health and employers.
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Reduction Act and Drug Development physician administration. Approva l of new uses for the sample of eight drugs in this study took as little as less than one year and as long as The Inflation Reduction Act of 2022 (IRA) introduced the Medicare Drug Price Negotiation Program (DPNP) 13 years Lon afteg r -tTe herm ini t B ia eln ie ndi fit c S attra ion te.gy The — num Empl beoye r ofr s fo ne llo ew d - ton o con use si s de rarnge how d ftrhe om la tw w o mtio ght ni ne ina . dve Therse te nt filn y di li ng ms it the with the goal of lowering Medicare spending on medications. The IRA primarily targets Medicare but may have demonstpi rape te ltiha net of ne f w ut use ures or for al sm mea di llc -m atio ons lec ul ava e dr ila ugs ble c thr an ough becom the ei r dom heailna th nt pl a cns ont — ribu po tor tes nt to ialtlhe y iove mpa ra cl tl i ng bene em fip tl oye to e indirect implications for employment-based health plans. One aspect of the drug price negotiation program may patients w cove ell-r be ed ing by aend mp pr loy oduc ment tiv -iba ty. se d health plans. lead to reductions in overall pharmaceutical research and development. This, in turn, may decrease the availability of new treatments for employees and their families that might otherwise have improved health outcomes, F ollow-on indications represent a critical area of drug development that leads to FDA approvals and may enhanced worker productivity, and lowered employer spending on health benefits. e ventually represent a substantial share of drug utilization among workers and their families covered by Figure 1 e mployment-based health plans. The IRA's differential timelines for the DPNP, subjecting pills to potential price Specifically, the IRA allows Medicare to select small-molecule drugs — usually oral medications or pills — for Share of Drug Utilization by Initial vs. Follow-On Indications, 2022 setting four years sooner than biologics, reduces incentives for this vital follow-on research. Employers should the DPNP as early as seven years after initial Food and Drug Administration (FDA) approval. In contrast, large- monitor the policy landscape to understand how these dynamics might affect future drug availability, employee molecule drugs (i.e., biologics) — often infusible or injectable — cannot be chosen until 11 years after the first treatment options, and overall health care strategy. 1 FDA approval. This difference is sometimes referred to as the “Pill Penalty.” Initial Use, 35% A key concern is whether the Pill Penalty disincentivizes drug manufacturers from investing in small-molecule medications. Moreover, the policy may discourage drug manufacturers from pursuing research to find new uses (known as follow-on indications) for existing small-molecule drugs. This type of research often occurs years after This study was conducted through the EBRI Center for Research on Health Benefits Innovation (EBRI CRHBI), a drug's initial launch but can significantly expand its clinical value to new diseases or patient groups. For with the funding support of the following organizations: Aon, Blue Cross Blue Shield Association, JP Morgan 2 example, one-half of all small-molecule treatment options were developed as follow-on indications. C hase, and PhRMA. Understanding the real-world importance of these new uses is crucial for evaluating the potential impact of the Any New Use, 65% Pill Penalty on access to drugs among workers and their families. The Employee Benefit Research Institute is a private, nonpartisan, and nonprofit research institute based in W ashington, D.C., that focuses on health, savings, retirement, and economic security issues. EBRI does not lobby EBRI Research Snapshot: How Important Are New Uses for Today's Pills? and does not take policy positions. The work of EBRI is made possible by funding from its members and ® sponsors, which include a broad r So au nge rce: M of era tipubl ve Miac rk e a tSc nd an pr Com iva mt ee rc ior al Cla ga im ni s Dat zaatbia ons. se, 20 2F 2. or more information, visit ® To investigate the significance of follow-on indications, MarketScan Commercial Claims from the year 2022 www.ebri.org. were analyzed. Pharmacy data were examined for eight small-molecule drugs used to treat conditions in oncology, cardiology, and immunology. These therapies were chosen because their follow-on indications target diseases distinct from those originally approved. This allowed us the opportunity to link prescription drug fills to specific conditions using ICD-10 diagnosis codes from the patients’ medical claims during the year. For one-half Implications for Employee Health and Employers of our initial sample of 142,008 individuals, we were able to confidently associate the member’s utilization with the drug's initial FDA-approved indication or one or more of its subsequently approved indications. While the goal of lowering drug costs in Medicare is important, these findings highlight potential unintended consequences of the IRA's shorter timeline for small-molecule medicines that employers should be aware of: Key Finding: Workers and their families used medicines prescribed for new uses twice as often than for their initial indication Value of Continued Research — The data suggest that follow-on research for small-molecule medicines provides significant, real-world clinical value, expanding treatment options for employees and their Follow-on research often leads to new uses for a medicine to treat different diseases, among other patient 4 families well after a drug's initial market entry. See Eek, Daniel, Meaghan Krohe, Iyar Mazar, Alison Horsfield, Farrah Pompilus, Rachel Friebe, and Alan L Shields. 2016. populations, or in alternative formulations than listed in the initial FDA approval. For example, post-launch “Patient-R eported Preferences for Oral versus Intravenous Administration for the Treatment of Cancer: A Review of the Literature.” Patient Preference and Adherence 10 (August): 1609–21. doi:10.2147/PPA.S106629. 1 See Hickey, Kevin J., Hannah-Alise Rogers, and Laura A. Wreschnig. (December 8, 2023). Medicare Drug Price https://www.tandfonline.com/doi/full/10.2147/PPA.S106629 Negotiation Under the Inflation Reduction Act: Industry Responses and Potential Effects. (CRS Report No. R47872). 3 https://www.congress.gov/crs-product/R47872. See PhRMA. “Emerging Value in Oncology: How Ongoing Research Expands the Benefits of Oncology Medicines.” 2023. ht tps://cdn.aglty.io/phrma/global/resources/import/pdfs/PhRMA_Emerging%20Value%20Report_FIN- 2 See Partnership for Health Analytic Research. “Implications of the Inflation Reduction Act Price Setting Provisions on web_July2023_v2.pdf. ### Post-approval Indications for Small Molecule Medicines.” 2023. https://advi.com/wp-content/uploads/2024/12/Implications- of-the-IRA-on-Post-Approval-Small-Molecules-2006-2012_Final.pdf. © 2025, Employee Benefit Research Institute, 901 D St. SW, Suite 802, Washington, DC 20024, 202/659-0670 | ebri.org 3 2