How the

Inflation Reduction Act

lowers prices and helps patients

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What is the Inflation Reduction Act?

  • The Inflation Reduction Act is a groundbreaking new law passed by Congress and signed into law by President Biden that put in place historic drug price reforms including requiring Medicare to negotiate for lower prices.
  • The law is the most extensive piece of health care legislation to be enacted into law since the Affordable Care Act in 2010 and is the largest prescription drug reform passed since the creation of Medicare Part D in 2003.
  • The prescription drug price reforms in the Inflation Reduction Act are historic — truly a monumental victory for patients, taxpayers, and the American people. For the first time in decades, Congress stood up for patients and Big Pharma lost.
  • The drug industry’s influence was still evident, however. The law passed on strict party line votes with every Democrat voting to lower drug prices, and every Republican voting with Big Pharma to block the reforms.

What does each provision do?

The Inflation Reduction Act delivers five historic drug price reforms that will deliver relief to millions of patients on Medicare.

  • Medicare negotiation: For the first time ever, Medicare is required to negotiate the prices of certain high-cost drugs — finally undoing the nearly 20-year ban on Medicare using its purchasing power to get a better deal for Americans. By 2029, Medicare could be negotiating the prices of as many as 60 of the costliest drugs.
  • Curbing drug company price gouging: For the first time ever, the Inflation Reduction Act will penalize drug companies for increasing drug prices faster than the rate of inflation. Until now, drug companies have been able to increase prices at will — often hiking prices every year, sometimes more than once.
  • Medicare Part D out-of-pocket caps: For the first time ever, there will be an annual limit on the amount Medicare Part D beneficiaries pay for the prescriptions they pick up at the pharmacy. In 2025, that limit is set at $2,000, when right now some seniors pay more than $15,000 out-of-pocket each year.
  • $35 monthly insulin copay cap for Medicare: For the first time ever, Medicare beneficiaries will pay no more than $35 per monthly prescription for insulin.
  • Free vaccines: Starting in 2023, all adult vaccines covered by Medicare Part D will be free for Medicare beneficiaries.

What’s the bottom line for patients and Americans?

The Inflation Reduction Act will save millions of patients millions of dollars by reducing drug prices and out-of-pocket costs in the Medicare program. As each of these provisions take effect in coming years, Americans will see their savings grow and get real relief from the predatory drug pricing practices of Big Pharma.

  • Medicare negotiation: Medicare beneficiaries who take medications for which Medicare negotiates lower prices will see drug cost savings because the law requires that all Part D patient cost-sharing is based on the negotiated, lower price. The lower the price, the lower the out-of-pocket cost for patients.
  • Curbing drug company price gouging: No longer will drug companies be able to raise prices at will, meaning savings for patients every year as we curb price increases. Even if a drug company decides to raise prices above the rate of inflation and pay the penalty, Medicare beneficiaries will pay cost-sharing based on a lower price pegged to inflation.
  • Medicare Part D Out-Of-Pocket Caps: This policy is expected to help more than 1 million enrollees save thousands of dollars each year, and over time many millions of people will benefit from this limit on out-of-pocket payments.
  • $35 insulin copay cap for Medicare: About 2.7 million Medicare beneficiaries are expected to save an average of $1,200 a year each from the insulin copay cap.

Watch to learn more about the Inflation Reduction Act

When will the Inflation Reduction Act go into effect?

Putting brand new programs like Medicare negotiation into effect takes time, but some portions of the bill will lower prices for patients as soon as 2023.

2023
  • Drug companies begin to be penalized for price gouging, shielding patients from price increases that outpace the rate of inflation.
  • Monthly insulin copays capped at $35 for people on Medicare.
  • Vaccines covered by Medicare Part D will be free to beneficiaries.
  • The Secretary of Health and Human Services begins to negotiate with drug companies for 10 of Medicare’s costliest drugs.
2024
  • Medicare beneficiaries will owe $0 once they reach the catastrophic phase of Medicare Part D, this limit will occur after approximately $3,250 of out-of-pocket spending.
  • Eligibility for Medicare Part D’s “extra help” program will be expanded to anyone with income <150% of the federal poverty level, extending free or low-cost drug benefits to nearly half a million beneficiaries.
2025

Annual Part D prescription out-of-pocket costs will be capped at $2,000.

2026

Lower prices for the first 10 negotiated drugs will become available, delivering savings to taxpayers as well as patients taking the selected medications.

2027-2029

Additional drugs will be selected for negotiation each year, and by 2029 as many as 60 drugs total could be selected and negotiated.

President Biden Signs Inflation Reduction Act into Law

Real People, Real STories

Hear from Patient Advocates

Medicare Negotiation

For the first time ever, Medicare will be required to negotiate directly with drug companies for lower drug prices.

“I’m a Medicare beneficiary, but even still my Spiriva Respimat alone cost $3,300 out-of-pocket last year. Luckily, Spiriva is one of the first drugs that could be eligible for Medicare negotiation, bringing lower prices and costs for patients like me. With lower drug prices, I would likely be able to spend money on other expenses and needed medical treatment that I currently go without.”

Jan B.
Leesburg, FL

“I live with a rare cancer and type 2 diabetes. Januvia for my diabetes carries a monthly list price of $521, and my oral chemotherapy Imbruvica has a monthly list price of nearly $16,000. Under this drug pricing package, expensive drugs like Januvia would likely be eligible for negotiation under Medicare, bringing lower prices for patients like me.

Steven Hadfield
Charlotte, NC
Photo of Steven Hadfield

$2,000 Out-of-Pocket Cap

Right now, some Medicare beneficiaries pay out-of-pocket more than $15,000 a year for their prescription drugs. Starting in 2025, Medicare Part D out-of-pocket costs will be capped at $2,000 for all of the prescriptions beneficiaries pick up at the pharmacy counter.

“To keep my multiple myeloma cancer at bay, I take a medication called Revlimid, which costs me $20,000 each year on Medicare. To afford it, I have fundraised, searched for grants, sold furniture and my husband’s truck, and zeroed out our savings. The $2,000 out-of-pocket cap would be life changing for me and my husband. We could finally replenish our savings account and do things we have been putting off like seeing the dentist; and I won’t have to worry about leaving my husband bankrupt.”

Jackie Trapp
Muskego, WI
Photo of Jackie Trapp

“Since I had a benign brain tumor removed in 2012. I’ve had to take medications to prevent seizures. My doctors want me to try a new anticonvulsant, Briviact, but it carries a list price of nearly $1,300 a month in the United States. With an out-of-pocket cap for Medicare, I will finally be able to afford the best treatment for me.

Maureen Iten
Shoreview, MN
Photo of Maureen Iten

“To treat my multiple myeloma, I rely on a daily oral chemotherapy drug called Revlimid that brings out-of-pocket costs of over $15,000 a year. This amount is impossible for me to cover on my fixed income. The Medicare out-of-pocket cap in this package will save me almost $13,000 a year. I can’t begin to express what that will mean for me and my standard of living.”

Ramae Hamrin
Bemidji, MN
Photo of Ramae Hamrin

“I currently can’t afford my Lyrica and gabapentin prescriptions for multiple sclerosis. I am on a fixed income and each of these medications cost hundreds of dollars a month, even with Medicare. The out-of-pocket cap for Medicare beneficiaries like me would reduce my costs and help bring my unaffordable medicines more within reach.

Scarlett Woodard
Albany, GA
Photo of Scarlett Woodard

“Between my expensive MS drugs, pancreatitis medicine, and inhalers, I spent almost $2,600 out-of-pocket last year. That doesn’t include some drugs that I go without or ration simply because they are too expensive. With a $2,000 out-of-pocket cap, I. will finally be able to pursue the best course of treatment for my MS, not just the one I can afford.

Therese Humphrey Ball
Ogden Dunes, IN
Photo of Therese Humphrey Ball

Curbs to yearly drug company price increases

Now, drug companies will face penalties for increasing the prices of prescription drugs covered by Medicare faster than the rate of inflation.

“I suffer from rheumatoid arthritis, diabetes, asthma, and gastroparesis. Even with Medicare, I spend almost $15,000 a year just on my Humira medication, a drug that’s price has increased by over 400% since 2006. The measure to curb drug price increases for Medicare beneficiaries will ensure that Humira’s manufacturer cannot continue to unfairly increase prices for patients like me. And the $2,000 out-of-pocket cap will allow me to afford my Humira without making sacrifice after sacrifice.”

Katherine Pepper
Kent, WA
Photo of Katherine Pepper

“For my leukemia, my oncologist prescribed the oral chemotherapy Imbruvica, which has a monthly list price of almost $16,000. From 2014 to 2021, Imbruvica’s price increases have outpaced inflation. With the new inflation cap rebates, my Imbruvica’s price will be protected from continued price gouging it’s seen for the past 8 years.

Lynn Scarfuto
Herkimer, NY
Photo of Lynn Scarfuto

Capping insulin copays at $35 a month for medicare patients

Medicare patients with diabetes will now have their insulin copays capped at $35 per month.

“I have been living with type 1 diabetes for 50 years. The new $2,000 cap on out-of-pocket costs for my prescriptions plus the $35 insulin copay cap mean that I’ll spend much less each year on my drugs. With lower drug costs, I’d be able to visit my grandchildren more or go to the store and not have to worry about purchasing something I need for my house.”

Bob Parant
Westbury, NY
Photo of Bob Parant

“I live with high blood pressure as well as insulin-dependent diabetes. I live off a fixed income, so I have to plan to ensure I can afford my prescriptions. The new $35 copay cap for my insulin will ensure I can afford my insulin for as long as I need it.

Patricia McKenzie
Atlanta, GA
Photo of Patricia McKenzie

What the Experts are Saying

“And the Senate has finally also taken on Big Pharma, and will after decades of trying be able to negotiate lower prescription drug prices. The Inflation Reduction Act is gonna lower prescription drug costs for seniors.”

— Senate Majority Leader Chuck Schumer

“When President Biden signed the Inflation Reduction Act, he not only made history, he made progress. When Congress passed this legislation, frankly we jumped for joy. This is so exciting! Because of the transformative difference this law would make for America’s working families… The authority of the HHS to negotiate for lower prescription drug costs. Long sought for, finally achieved. And for our seniors on Medicare, we have a $2,000 cap on prescription drug costs, this is remarkable.”

— House Speaker Nancy Pelosi

“For too long, Medicare has been forced to contend with Big Pharma with one hand tied behind its back – that ends when this bill is signed into law..I have been spotlighting how the drug pricing system is broken top to bottom. At last, the Senate has begun to redefine the relationship between Medicare and Big Pharma.”

— Senate Finance Committee Chairman Ron Wyden

“The Inflation Reduction Act is also one of the most significant pieces of health care legislation to move through Congress in over a decade. It breaks Big Pharma’s monopoly on prescription drug prices… Today we are finally leveling the playing field to ensure seniors are no longer forced to choose between putting food on their table and their lifesaving prescription drugs.”

— House Energy and Commerce Chairman Frank Pallone

“Hard to put into words how big of a deal it is that we are finally lifting the ban on Medicare being able to negotiate drug prices. Over a decade of fighting. Millions and millions of seniors fought for this. Finally, they’ll have lower costs.”

— Sen. Amy Klobuchar

“With commonsense reforms that will allow Medicare to negotiate prescription drug prices and cap out-of-pocket costs. We will protect seniors from outrageous prices charged by pharmaceutical companies for lifesaving medications.”

— Sen. Cory Booker

“The immediate benefits of this legislation are real. First, we’re going to see the broad benefits that come from Medicare negotiation, and we’re going to be able to use it in a way that is going to protect consumers, taxpayers and employers without harming innovation. Then secondly, we are going to bring immediate financial benefits to seniors on Medicare with a $2,000 cap on drug costs and a $35 monthly cap on insulin. This is going to extend the life of Medicare, this is going to lower costs for taxpayers.”

— Rep. Peter Welch

“After years of fighting the pharmaceutical industry, we have won the fight to allow Medicare to negotiate drug prices. No longer will Medicare be forced to pay whatever outrageous prices Big Pharma decides to charge.”

— Rep. Susan Wild
“The drug pricing reform provisions of the IRA have the potential to transform the ways in which Medicare pays for drugs, and to provide financial benefits to millions of seniors who have difficulty affording their medications.”
— Rachel Sachs, JD, MPH, ​​Professor of Law, Washington University in St. Louis
“The IRA addresses drug affordability for Medicare beneficiaries in several ways…This is a really historic fix to problems with the Part D benefit that health policy researchers and advocates have been working on for two decades!”
— Michelle Mello, JD, PhD, Professor of Law and Health Policy, Stanford Law School
“Preventing the ability of drug companies to increase prices on the same drug year after year is huge. This is something that will greatly benefit seniors and the public.”
— Vincent Rajkumar, MD, Mayo Clinic
“Preventing the ability of drug companies to increase prices on the same drug year after year is huge. This is something that will greatly benefit seniors and the public.”
— Vincent Rajkumar, MD, Mayo Clinic
“Experts say that proposals like Medicare negotiation will help encourage the drug industry to focus on products that offer meaningful value to patients. Equally important, such changes would help curtail some of the drug industry’s more controversial pricing practices and provide all Americans with much-needed financial relief.”
— Leigh Purvis, MPA, Director of Health Care Costs and Access, AARP Public Policy Institute
“While not everyone will use these expensive drugs, when you need them, you would have the security of knowing that you would be able to afford them.”
— Stacie B. Dusetzina, PhD, Associate Professor, Health Policy, Vanderbilt University