Medicare Drug Costs Under Inflation Reduction Act: Implications Ahead

The Inflation Reduction Act (IRA) is poised to change how Medicare beneficiaries access and afford their medications under the Medicare drug benefit. In 2025, evaluations show that co-pays for selected drugs will be higher than in 2024, and many specialty drugs will require prior authorization. While 20% of beneficiaries might benefit from the IRA's out-of-pocket cap, many others may face increased costs and barriers to accessing medications. Policymakers need to assess how the IRA impacts beneficiaries' access to treatment and overall drug costs.

The Centers for Medicare and Medicaid Services (CMS) will establish Maximum Fair Prices (MFPs) for certain drugs, which will begin to take effect in 2026 and 2027. This report provides an in-depth analysis of the formulary access and cost-sharing changes for 25 drugs between 2024 and 2025, highlighting discrepancies in access between Medicare Advantage Prescription Drug Plans (MA-PDs) and standalone Prescription Drug Plans (PDPs). There are concerns that cost-sharing may increase due to new regulations and utilization management practices that may arise from the IRA.

This report emphasizes the need for continuous monitoring of formulary access and the out-of-pocket costs for beneficiaries as the IRA is fully implemented. It showcases the uneven impact of these changes on different demographics, particularly lower-income and non-urban populations, stressing the necessity of policy adjustments to ensure equitable access to medications for all beneficiaries.