The Inflation Reduction Act (IRA) was implemented to manage the ever-increasing costs of prescription medications, specifically under Medicare. It also allows drug price negotiations and manufacturer rebates.
In 2022, President Joe Biden signed the Inflation Reduction Act (IRA), which aims to minimize the effects of rising U.S. healthcare costs.
The 2022 IRA makes vaccinations free for everyone with Medicare and caps out-of-pocket costs for millions more.
The act also authorizes Medicare to negotiate some drug prices directly with drug manufacturers — the first time this has been allowed.
Since President Biden signed the act, many changes have been implemented, and more are due to take place in the future.
Manufacturer rebates to Medicare
From 2023, drug manufacturers began paying Medicare rebates for medications included in Part D plans if the price increases for those drugs exceeded the rate of inflation. This has meant a much slower overall price increase.
Some medications are eligible for payment under Part B. And from 2028, the IRA will begin adding Part B drugs to the negotiation program.
Insulin price caps
Under the Medicare prescription drug benefit, insulin costs were capped at $35 from October 1, 2022, until January 1, 2024. Then, insulin was either capped at $35 or 25% of a plan’s negotiated price, whichever was less. This applies even if you haven’t met your Part D prescription drug plan deductible.
Extra Help availability increases
In 2024, Medicare’s Extra Help program changed, resulting in more people being eligible and experiencing greater savings on their prescription medications.
If you qualify for Extra Help, you’ll pay a $0 premium and deductible for your Part D prescription drug plan, as well as the following out-of-pocket costs:
- You’ll pay no more than $4.90 for generic medications.
- You’ll pay no more than $12.15 for brand-name medications.
- Once you’ve paid a total of $2,000 in out-of-pocket expenses, you’ll pay no further drug costs for the remaining calendar year. This is expected to increase to $2,100 in 2026.
From 2026, Medicare-negotiated drug prices will start to take effect.
For the first time in history, Medicare has the legal power to directly negotiate prices of specific high cost medications.
Different medications have been selected for negotiation over the coming years:
| 10 drugs for 2026 negotiation | Commonly prescribed for |
|---|---|
| Eliquis | • preventing and treating blood clots |
| Enbrel | • rheumatoid and psoriatic arthritis • psoriasis |
| Entresto | • heart failure |
| Farxiga | • diabetes • heart failure • chronic kidney disease |
| Fiasp Fiasp FlexTouch Fiasp PenFill NovoLog NovoLog FlexPen NovoLog PenFill | • diabetes |
| Imbruvica | • blood cancer |
| Januvia | • diabetes |
| Jardiance | • diabetes • heart failure |
| Stelara | • psoriasis • psoriatic arthritis • Crohn’s disease • ulcerative colitis |
| Xarelto | • preventing and treating blood clots • reducing risk for people with coronary or peripheral artery disease |
| 15 drugs for 2027 negotiation | Commonly prescribed for |
|---|---|
| Austedo Austedo XR | • chorea in Huntington’s disease • tardive dyskinesia |
| Breo Ellipta | • asthma • chronic obstructive pulmonary disease (COPD) |
| Calquence | • chronic lymphocytic leukemia • small lymphocytic lymphoma • mantle cell lymphoma |
| Janumet Janumet XR | • type 2 diabetes |
| Ibrance | • breast cancer |
| Linzess | • chronic idiopathic constipation • irritable bowel syndrome with constipation |
| Ofev | • idiopathic pulmonary fibrosis |
| Otezla | • oral ulcers in Behcet disease • plaque psoriasis • psoriatic arthritis |
| Ozempic Rybelsus Wegovy | • type 2 diabetes • type 2 diabetes and cardiovascular disease • obesity and cardiovascular disease |
| Pomalyst | • Kaposi sarcoma • multiple myeloma |
| Tradjenta | • type 2 diabetes |
| Trelegy Ellipta | • asthma • COPD |
| Vraylar | • bipolar I disorder • major depressive disorder • schizophrenia |
| Xifaxan | • hepatic encephalopathy • irritable bowel syndrome with diarrhea |
| Xtandi | • prostate cancer |
The IRA aims to save people money on their prescription medications in many ways, and these cost savings should continue over the coming years.
A greater number of older adults with fixed incomes and limited resources can benefit from Extra Help. And the drug negotiations taking place until 2029 could mean greater medication savings for everyone with Medicare.