Inflation reduction act aims to reduce healthcare costs for patients
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US: The Inflation Reduction Act aims to reduce healthcare costs for patients 


The Inflation Reduction Act (IRA) was signed into US law on 16th August 2022. The legislation is an updated, smaller version of The Build Back Better Act (BBBA) which the US Senate failed to pass in 2021. Aiming to curb inflation, the bill contains a broad package of healthcare, tax and climate change provisions. The policies targeting healthcare will have a direct impact on setting the drug prices and controlling the out-of-pocket costs for Medicare patients: 

  • Negotiation of drug pricing: The IRA allows Medicare to negotiate the prices of high-cost prescription drugs. This will initially include drugs covered under Medicare Part D, with 10 price negotiations announced for 2026. In 2028 the scope of negotiations will widen to drugs under Medicare Part B. 
  • Curbing the price increases: drug makers who increase Medicare drug prices faster than the rate of inflation will have to pay a rebate to Medicare. The inflation rebates will only apply to drugs in Medicare Part B without competition and Part D drugs that cost more than $100 a year. 
  • Out-of-pocket spending caps:
    • Starting in 2025, the bill phases in a $2,000 annual cap for out-of-pocket Part D plan costs for people enrolled in Medicare.  
    • The coinsurance for Part D catastrophic coverage will be eliminated in 2024. Currently, the patients who reached the catastrophic coverage phase (catastrophic threshold in 2022 is set at $7,050) pay 5% coinsurance on their drug.  
  • Insulin price cap: monthly cost sharing for patients on Medicare will be capped at $35 a month, starting from 2023. However, after this initiative was blocked in the Senate, the bill does not include the cap on insulin costs for patients with private health insurance. 
  • Biosimilar add-on payments increase: Increases the Medicare Part B add-on payment for biosimilars from 6% to 8% of the average sales prices. 
  • Extending Affordable Care Act subsidies: the bill will extend the enhanced Affordable Care for people buying their own health coverage on the Affordable Care Act Marketplaces till 2025. 
  • Improving access to vaccination in adults: the cost-sharing for vaccines under Medicare Part D will be eliminated and certain vaccines will be covered under Medicaid and CHIP programmes. 


  1. H.R.5376 – Inflation Reduction Act of 2022, Accessed 22/08/2022 
  2. KFF Accessed 22/08/2022 

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