The Inflation Reduction Act: A boon for the generic and biosimilar industry

After more than a year of negotiation, a $740 billion climate and health care bill known as The Inflation Reduction Act (IRA) became law on 16 August 2022. In addition to its impact on the environment, job creation and reducing inflation, a key focus is to reduce the burden of Medicare by over $100B per year and other benefits to 65 million Medicare patients. A fixed number of top expenditures drugs that have stayed as single-source chemical products for 8 years and the biologicals for 12 years; 2 years more are allowed if the approval of a generic or biosimilar is imminent. Once a second source appears, as a generic or biosimilar, the price reduction is removed. The number of products negotiated for price reduction goes from 10 to 20 over the years and stays fixed at this number. Reaching any significant number out of the 14,000 reimbursed will take forever if biosimilars and generics keep entering. The IRA does not apply to private markets.

The IRA legislation and related statutes were analysed in consultation with legal teams; the spending data were derived from the CMS portals and the FDA databases to rank the most likely products selected when the selection process is initiated.

The savings to Medicare will come from reducing the price of only a few products, primarily with $1B and upward spending; when Plan B product scheduling enters, these will be at the bottom of the selection because of their lower expenditure. The total number of products subject to price reduction may be negligible if generics and biosimilars are introduced after the exclusivity period of the listed drug or reference product. The private market with an 80% share may benefit due to price spillover but mainly by the expedited entry of generics and biosimilars.

The entry of generics and biosimilars will now be encouraged by brand-name product companies, reducing the intellectual property hurdles like the "patent dance" for biosimilars. The IRA includes restrictions to prevent the brand name companies from exploiting the entry of generics and biosimilars to assure their independence.