Medicare Drug Price Negotiation aims to reduce the prices paid for high cost pharmaceuticals. Traditionally, biologic drug price reductions after loss of exclusivity (LOE) have occurred due to the introduction of biosimilar competitors. A recent paper by Beinfeld et al. 2025 examines whether Medicare Drug Price Negotiation enacted under the Inflation Reduction Act (IRA) is likely to reduce prices more than biosimilar entry.
Finding 1: Biosimilar entry reduces prices
Historically, biosimilar entry has lead to a 40.3% decrease in prices after LOE within five years of biosimilar launch.
How does this compare to projected price changes under Medicare Drug Price Negotiation. To answer this, the authors examine the projected prices changes for ustekinumab (Stelara). They use published estimates of IRA maximum fair price discounts for ustekinumab (40%) and applied these to projected annual Medicare spending through 2029. Medicare spending growth after 2029 was expected to follow the 2019-2023 spending growth trend.
Finding 2: IRA drug price negotiation leads to larger discounts in the short-run, but smaller discounts in the long-run
Whereas IRA drug price negotiation would decrease prices by 40% (i.e., 60% of the pre-biosimilar entry level), price declines are larger in the free-market biosimilar based approach.
Across all originator-biosimilar families, the mean market-weighted ASP fell to 64.9% of its pre-entry level three years after the first biosimilar and to 45.9% after five years. When incorporating net pricing data for part D drugs (adalimumab and tocilizumab), price declines were similar but slightly greater, reaching 58.9% at three years and 40.3% at five years post launch).
The authors conclude that:
…both mechanisms [IRA drug price negotiation and biosimilar entry] can generate substantial savings for Medicare, though they do so at different rates and over different time horizons. While negotiated prices under the IRA may achieve greater near-term fiscal savings, our modeling suggests that the cumulative price reductions achieved through biosimilar competition may surpass those of the IRA by the third year following market entry.
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