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August 17, 2022

The Inflation Reduction Act is now law. Here's what that means for health care.

Daily Briefing

    President Joe Biden on Tuesday signed the Inflation Reduction Act into law, paving the way for several major health care reforms to go into effect.

    Our take: 10 health policy topics to watch in 2022

    What's in the Inflation Reduction Act?

    The Inflation Reduction Act, which was passed by the Senate earlier this month and the House last week, is a $740 billion reconciliation package that includes several provisions on taxes, the climate, and health care.

    Under the new law, Medicare will be able to negotiate certain prescription drug prices with certain pharmaceutical companies, saving the federal government roughly $288 billion over 10 years. That provision will apply to 10 drugs starting in 2026 and expand to 20 drugs in 2029.

    For Medicare beneficiaries, the bill will also introduce a $2,000 cap on out-of-pocket prescription drug costs starting in 2025, ensure seniors are able to receive free vaccinations next year, and cap the cost of insulin at $35 a month starting next year.

    The bill will also penalize drug manufacturers if they raise the prices of their drugs faster than the rate of inflation. If the increase in a drug's price outpaces inflation, the manufacturer will be required to pay a rebate to Medicare. The Senate parliamentarian ruled that this provision could apply only to Medicare under the rules of reconciliation, not to drugs covered by private insurance.

    'The American people won'

    As President Biden signed the Inflation Reduction Act into law, he noted that his administration is now in a "season of substance" after the legislation was stalled for more than a year.

    "The American people won and the special interests lost," Biden said. "Today offers further proof that the soul of America is vibrant, the future of America is bright and the promise of America is real and just beginning."

    "Too often, we confuse noise with substance. Too often, we confuse setbacks with defeat. ... But with unwavering conviction, commitment and patience, progress does come," he added, noting that signing the bill was an "action that I've been looking forward to doing for 18 months."

    At the signing, Senate Majority Leader Chuck Schumer (D-N.Y.) said, "In normal times, getting these bills done would be a huge achievement, but to do now, with only 50 Democratic votes in the Senate over an intransigent Republican minority, is nothing short of amazing."

    "I am confident this bill will endure as one of the greatest legislative feats in decades: it will lower costs, create millions of good-paying jobs, and is the boldest climate bill ever," Schumer added.

    Senate Minority Leader Mitch McConnell (R-Ky.) previously condemned the bill—particularly the prescription drug provisions, which he said would take "a buzz saw to the research and development behind new, lifesaving medical treatments and cures." (Woodall et al., USA Today, 8/12; Cancryn/Olander, Politico, 8/16; Chen, Axios, 8/16; Restuccia, Wall Street Journal, 8/16; Wang, Washington Post, 8/16; Tankersley, New York Times, 8/16; Sprunt, NPR, 8/16; AP/Modern Healthcare, 8/16; Gangitano/Chalfant, The Hill, 8/16; Singman, Fox News, 8/16)

    Health policy topics to watch in 2022

    The legislative, regulatory, and judicial outlook for health policy in 2022


    The Biden administration's first year in office was unsurprisingly dominated by the Covid-19 pandemic. While Democrats in Congress were able to pass part one of President Biden’s infrastructure package, other health care priorities were largely sidelined. As we look to 2022, there are 10 key health care topics that are ripe for congressional or regulatory action. If and how Congress and the Biden administration move on those actions will have strategic implications for industry executives across the health care ecosystem.

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