New CBO Report Confirms the IRA's Drug Pricing Provisions Aren't Delivering as Promised

When Congress passed the Inflation Reduction Act's Medicare Part D provisions in 2022, the Congressional Budget Office (CBO) projected the changes would reduce federal deficits by $129 billion through 2031. But just four years later, CBO’s own numbers now tell a very different story.

CBO now projects that the provisions once expected to generate savings for Medicare will increase the deficit by far more than originally projected.

Drug price negotiation was originally expected to cut net prices by roughly 50 percent, but CBO has since revised that estimate downward. The inflation rebate provision, once projected to save $63 billion, has also underperformed compared to earlier calculations. Inflation grew faster than CBO anticipated in 2022, which raised the benchmarks that manufacturers are measured against and shrank the rebates owed to Medicare.

The biggest discrepancy was the Part D redesign. CBO originally estimated it would add $30 billion to the deficit through 2031. Instead, the agency has added roughly $700 billion to its Part D spending projections for 2026 through 2035 compared with its prior baseline, with $550 billion of that increase tied to a single year of plan bids. For 2026 alone, Part D plans anticipated a 35 percent jump in per-enrollee costs. CBO had projected about 5 percent.

As a result, Medicare Part D spending is now projected to reach $2.1 trillion through 2035, up from $1.5 trillion in last year's baseline.

It’s no surprise that this additional spending is unlikely to result in savings for patients. In 2024, a report from IQVIA projected that the IRA wouldn’t directly lower costs for patients — and warned that unintended consequences of the Part D redesign could cause insurers to change their benefit designs in ways that would make it more difficult for patients to access the medicines they need.

Nearly two years later, we’re seeing these projections come to fruition. Insurers are pulling back as they absorb more financial risk under the redesign. Fewer plan options mean less competition and fewer choices for seniors trying to find coverage that fits their needs.

The IRA's drug pricing provisions were sold as a way to lower costs for the government and for patients. Nearly four years later, the government is spending more, patients are facing higher costs, and the market is consolidating in ways that limit choice for beneficiaries.

These findings should give policymakers considering further price control measures, such as Most Favored Nation, additional pause.  

Policies that promise savings on paper can carry very different consequences once implemented, and by the time those consequences surface, the damage to patients, competition, and long-term innovation is much harder to undo.

For further insight into the shortcomings of CBO’s estimates regarding the IRA, watch this recent interview between WWFH Executive Director Dan Leonard and Graham Cookson of the Office of Health Economics: What Europe Can Teach Washington About Drug Pricing: A Conversation with OHE's Graham Cookson