With this weeks’ announcement of the next drugs selected for Medicare price negotiation under the Inflation Reduction Act (IRA), it is an important moment to examine whether the program is delivering sustainable savings, or whether it is undermining the healthy competition that drives long-term prescription medicine affordability. This is especially true given that Part B drugs have been selected for the first time for the 2028 initial price applicability year (IPAY).
Passed in 2022, the IRA directs Medicare to “negotiate” drug prices through a new government-administered process. Supporters claimed the program would not harm generic or biosimilar competition because price controls would apply only when lower-cost alternatives were unavailable. In practice, however, the law initiates price controls before generic or biosimilar competition has a chance to begin, preempting the market forces that historically generate the largest and most reliable savings.
We know that generic and biosimilar competition can produce significant savings for the healthcare system. In the last decade, generic and biosimilar medicines combined generated $3.4 trillion in savings in the U.S. And biosimilars, alone, have generated $56 billion in savings since 2015, including $20 billion in savings in 2024, demonstrating their significant and growing economic impact on the U.S. healthcare system.
Yet the IRA fails to reflect how biosimilar competition actually develops. Although products are exempted from negotiation once a generic or biosimilar is approved and marketed, the negotiation process begins well before that point. For biologics, price controls are triggered after 11 years on the market, with a possible delay to 13 years. By contrast, the average time to first biosimilar launch exceeds 18 years. The earliest biosimilar entry occurred at just under 13 years – and only because the manufacturer launched at a high risk.
Hampering Long-Term Savings and Sustainability
Selecting drugs with imminent biosimilar launches for negotiation may appear to generate near-term savings but deprives the system of the long-term, sustainable savings that biosimilars provide.
There is new evidence to back this up. A recent study found that selecting biologics with near-term biosimilar competition for IRA negotiation may produce short-term savings but forgo greater long-term savings—savings only achievable through competition. The study estimated CMS savings would have been $3.2–$3.5 billion by year five had competition been allowed to proceed.
How does the IRA Harm Biosimilar Innovation?
Developing a biosimilar can take up to nine years and require investments of up to $300 million. Those decisions are made long before manufacturers know whether a product will be selected for price setting.
Selecting products for IPAY 2028 with imminent biosimilar market entrants discourages investment in biosimilars, making it harder for these lower-cost alternatives to enter the market and thrive. Already, nearly 90 percent of biologics losing exclusivity over the next decade lack a biosimilar in the pipeline. This hinders affordable access for America’s patients.
Policymakers Must Act to Amend the IRA
While supporters claimed the IRA would not harm generic or biosimilar competition, it is evident that this is not, and will not be, the case until reasonable changes are made to the IRA. Without significant reforms, patient access to lower-priced generics and biosimilars will be undermined, keeping America’s patients from benefiting from the cost savings generated by generic and biosimilar products.
Congress should recognize the need to recalibrate the IRA, especially given how it jeopardizes incentives for generic and biosimilar savings. Healthy competition works – when policymakers allow it to function.
