Predicting the Financial Impacts of the IRA for a Life Sciences Company


We used claims data to model the likely impacts of the Inflation Reduction Act (IRA) Part D drug pricing reforms on pipeline and portfolio products for a large life sciences manufacturer. Our Excel-based interactive tool enabled the client to assess impacts of Part D benefit redesign and Medicare drug price negotiation by estimating changes to manufacturer discount liability and net revenue for target products. The tool incorporated plan liability shifts associated with IRA policies, modeled how plans may change formulary management in response to increased liability, and determined resulting adjustments in manufacturer discretionary rebates that may be necessary to maintain beneficiary access and product market share. The model also reflected IRA impacts on patient out-of-pocket (OOP) costs and estimated how the Part D OOP cap may affect drug utilization. This work will inform the client’s risk mitigation, payer contracting, and patient access strategies for the coming years.

Client Type

Large life sciences manufacturer


Life sciences manufacturers need to understand how IRA reforms will impact net revenue and plan contracting strategies for their portfolio and pipeline products. One large manufacturer sought our assistance in predicting the financial impact to plans and resulting changes to formulary and benefit designs that plans might adopt, as well as associated patient access considerations of Part D benefit redesign and Medicare drug price negotiation on its products across various therapeutic areas.


We created a quantitative model using pricing assumptions and Medicare claims data to assess the financial impacts of IRA Part D benefit redesign on portfolio and pipeline products. These financial impacts included manufacturer mandatory discounts and discretionary rebate liabilities, plan liabilities, and beneficiary OOP costs. We built an interactive Excel tool that allows for user-driven input parameters, so that the client could assess—for its own products as well as for competitor products—how manufacturer contracting strategies may need to change in response to the combined impacts of benefit redesign and Medicare negotiation on Part D plans and beneficiaries. The model enabled the client to assess how these impacts may vary by product/therapeutic area, Part D plan sponsor, phase of coverage, and plan and beneficiary type (e.g., Medicare Advantage Prescription Drug Plans vs. standalone Prescription Drug Plans, low-income subsidy vs. non-low-income subsidy enrollees).

The model considered behavioral responses of key stakeholders as well as Medicare drug price negotiation under the IRA. We assessed how payers may change formulary designs and projected potential increases in beneficiary utilization due to greater affordability. In addition, we developed various maximum fair price (MFP) scenarios to determine how drug price negotiations for potentially selected client products (as well as competitor products) would impact the client’s product utilization and net revenue.


This project equipped the client with robust analytics about how IRA reforms—particularly Part D benefit redesign and Medicare negotiation—could affect market share and revenue, plan formulary management, and patient access to its pipeline and portfolio products relative to competitor products. The client can use this knowledge to inform contracting and plan engagement strategies and prepare for various negotiated MFP scenarios.

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