A Decrease in Innovation Is a Large Concern With New IRA Policies in Oncology

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Jeff Patton, MD, details considerations with the Medicare Drug Price Negotiation Program Draft Guidance and its effects in the community setting.

Jeff Patton, MD

The Centers for Medicare and Medicaid Services’ (CMS) implementation of new policies as a result of the Inflation Reduction Act (IRA) are poised to affect several areas of cancer care in the community setting.¹ With a few positive effects for patients and some financial as well as administrative repercussions on community providers and practices, Jeff Patton, MD, added that one of the biggest areas of concern with impending changes is regarding innovation.

“The IRA implementation policies are complicated, burdensome, and financially unattractive for community practices,” Patton said in an interview with OncLive®. “My biggest worry is the decrease in innovation. Pharmaceutical companies have a bad reputation with some people, but they innovate and bring innovative drugs to market that help us treat patients. We’re not curing cancer, and we need more solutions. Without the capital to invest in research and development, it’s not going to happen.”

In the interview, Patton detailed considerations with the Medicare Drug Price Negotiation Program Draft Guidance that was released in July 2024, its effects in the community setting, and more. Patton is CEO of OneOncology, officer-at-large for the Community Oncology Alliance, and executive chairman of Tennessee Oncology in Nashville.

OncLive: What were the key takeaways from the Medicare Drug Price Negotiation Program Draft Guidance for Initial Price Applicability Year 2027?

Patton: Like most government programs, it’s complicated, way too complicated. Anything that’s complicated creates a burden on clinics to implement that, so there’s going to be an execution burden on practices. That’s one big impact [and the second is] the financial burden. It’s putting us at risk for a period that we buy and build a drug and then the rebate gets paid back to us later, potentially, as was pointed out in some of the other statements. The manufacturers have choices on how they want to do it, which means that we have to be able to implement a policy in 2 different ways that is complicated on each side. It’s not going to be easy, and it creates more burden and more bureaucratic burden between us and our patients.

It will also require us to maintain separate inventories. We have to have an inventory for patients who are part of the mandatory discount program mandated by the IRA and patients who aren’t….We’ll have to hire staff, have separate inventory, [and] track whether we’ve gotten the rebate or not. There’ll be a significant administrative burden on our clinics to implement the policy….

Under one of the options for the implementation of the program, the discount would be negotiated with the manufacturer, we would buy and acquire the drug through our normal channels, and then the discount would then be rebated to us based on our low reimbursement.

[Plans] have 30 days to [submit Prescription Drug Event] records, and then it says [under the retrospective model proposed by CMS] that [the manufacturer] would make the [reimbursement] payment within 14 days. I believe that’s unlikely, and so we’re going to be on the hook financially for this discount for 45, 60, to 90 days. These drugs are expensive—if you multiply a $10,000 drug a month times 1000s [of drugs administered], who’s going to have the financial backing to be able to withstand this? It’s crazy.

What are important discussions going to center around as the first cycle of negotiations for drugs covered under Medicare Part D will become effective beginning in 2026?

We’ll have to educate our patients as this coming year there are some good things about the IRA which is going to make the old donut hole narrow and go away; the patient financial risk is going to be less which is a good thing. We want to educate our patients, but then educate our practice about how to implement this policy—it’s complicated so OneOncology will have draft teaching points to help educate on the policy. On the IRA side, we’re negotiating with CMS on the implementation to try to decrease the financial burden by taking us, [community practices], out of the risk for collecting that rebate from the manufacturers. That would be step one.

How will the CMS’s implementation of the program’s Maximum Fair Price [MFP] affect the ability of community practices to provide high-quality and affordable care to patients?

I worry about the financial burden; some small practices may not be able to hold the risk of waiting for the rebate. Now, perhaps the distributors may be able to extend terms to practices and help hold that risk, but that risk will cost money—they’re not going to do it for free—so the practices will then have to financially pay for the time value of money back to the distributors if they’re willing to do that.

The first thing is I worry about the financial risk. Number two, [community practices] will have to add staff to implement this program because it’s complicated. Number three, what’s crazy is that this policy will decrease the financial viability of our practice pharmacies. At the same time, CMS [has proposed] decreasing the reimbursement for services to physicians by [approximately] 3% in the face of inflation [starting in the 2025 calendar year]. I don’t know if the government is trying to put physicians out of business, but they’re certainly implementing policies that are making it difficult to stay independent and viable. Our clinics can deliver care at approximately a third of the cost of hospitals, so putting your low-cost provider out of business so that they join a higher cost care setting, ie hospitals, makes zero sense.

Are there any additional concerns to note about how the MFP Medicare Drug Price Negotiation is being used?

There’s an opinion piece in the Wall Street Journal talking about how this price negotiation is lowering pharmaceutical manufacturer and life science company’s margins to the point that they’re investing less in cancer drugs. I hope that’s an unintended consequence of this, but it’s harming patients. They are making it more difficult for life science companies to innovate and bring innovative drugs to the market, so they’re investing less in research and development. That is the worst consequence of this, that it’s harming patients.

What could the effects be of the proposed implementation of the IRA in Part D MFP and in Medicare Part B reimbursement?

On both sides, there will be lower cost offset for physicians to reimburse their practices, so it will make the economics of both Part B infusion clinics and Part D pharmacies less attractive.