Strategic evidence planning in the IRA: Insights from Year 1 drug price negotiations

Almost 3 years after being signed into law, the drug pricing negotiations for selected Medicare prescription medications under the Inflation Reduction Act (IRA) are now actively being put into practice. In 2024, the Centers for Medicare and Medicaid Services (CMS) released the first Maximum Fair Prices (MFPs) for the ten selected Part D drugs, which are scheduled to take effect in January 2026. Against this backdrop, an Issue Panel at ISPOR 2025 convened to reflect on the first year of implementation and explore key lessons for manufacturers, policymakers, and other stakeholders.

In the session, “What’s Next? Year 1 Learnings of Evidence Planning for IRA Drug Price Negotiation,” moderator Taylor T Schwartz, Managing Director at Avalere Health, led the discussion with panelists Michael Ciarametaro (Managing Director, Avalere Health), Peter Neumann (Director, Center for the Evaluation of Value and Risk in Health, Tufts Medical Center), and Russ Montgomery (Head of Value Assessment Strategy and Policy, GSK). This Deep Dive distills the session’s key insights and outlines practical considerations to help stakeholders navigate the complexities and uncertainties of the evolving Medicare drug price negotiation framework.

The evidence foundations of Year 1 negotiations and implications for MFPs

Taylor Schwartz led the session with a detailed overview of the breadth of evidence that manufacturers can provide to support the negotiation process. He walked through the Information Collection Request (ICR) and Evidence Dossier, the primary evidence submission mechanisms used by manufacturers. These include information on relevant therapeutic alternatives, clinical use in practice, and clinical comparative effectiveness. CMS also expects submissions to provide details on Medicare-specific indication prevalence, drug utilization, and healthcare resource utilization. Additional considerations include the therapeutic advance over alternatives, the extent to which the product addresses unmet medical needs, its impact on specific populations of interest, patient experience and preferences, and broader health equity considerations.

Drivers of pricing decisions and Year 1 negotiation trends

In the opening discussion, Michael Ciarametaro outlined several key observations from Year 1 in the MFP rationale documentation released by CMS. He began by addressing the debate around whether Year 1 delivered meaningful savings, noting:

“There's been a lot of discussion about whether or not there were savings in Year 1. The answer is, in the majority of cases, there were not on an individual drug basis. And I think there's important context there.”

While not every drug achieved savings individually, he emphasized the broader context, particularly CMS’s simultaneous efforts to stabilize the redesigned Part D benefit and manage a significant liability shift from the government to health plans. This likely led to a more cautious pricing approach in the first cycle. However, Ciarametaro noted that CMS appears to have adjusted its methodology in Year 2 to better reflect payment realities, including changes to reinsurance responsibilities.

Analyzing where drugs landed relative to the ceiling price, he stressed that a therapy’s economic value proposition played a central role. Drugs that clearly demonstrated savings for Medicare, such as anticoagulants or heart failure/diabetes combinations, were typically priced closer to the ceiling. In contrast, products with weaker cost-offset evidence experienced steeper discounts.

He also highlighted the role of therapeutic alternatives, which set the baseline for pricing adjustments. CMS mostly used within-class comparisons, though a few exceptions were guided by clinical guidelines spanning multiple classes. These alternatives, particularly biosimilars or less expensive treatment options, exerted downward pressure on MFPs.

Ciarametaro observed that CMS appeared to focus on current market conditions rather than anticipating future changes, as illustrated by varying treatment of immunosuppressants depending on whether biosimilars were already available. Finally, he pointed to a few cases where multiple competitors within a class were included in negotiations. In those instances, pricing differences that existed before negotiations were largely carried through afterward, suggesting that either CMS relied on existing evidence or accepted that the market had already internalized relative value.

Transparency challenges and the role of therapeutic alternatives

Peter Neumann highlighted CMS’s accomplishments within a constrained timeline, acknowledging: “Congress gave them very tight timelines. CMS hit all the milestones. They successfully negotiated prices with all ten manufacturers. They did it with relatively little political backlash, certainly compared to what it might have been…so give CMS its due.”

Nonetheless, he pointed to significant uncertainty surrounding how CMS used evidence to arrive at the final MFPs, citing the lack of transparency in the heavily redacted rationale documents. He remarked:

“Even if you got all the CMS negotiators in their room and didn't let them leave until they told you exactly how they negotiated evidence, I think they'd be hard pressed to really tell you, because Congress gave them a very difficult task here.”

Neumann acknowledged that CMS had to consider a wide range of qualitative factors – such as therapeutic advance, comparative effectiveness, unmet need, R&D costs, federal support, and distribution costs – but noted it is still unclear how those elements were weighed. However, he said there is evidence to learn from, particularly around therapeutic alternatives, which appeared frequently in CMS’s explanations: “It does seem that therapeutic alternatives were important. The explanations are full of mentions of therapeutic alternatives.”

In therapeutic classes where more than one drug was selected for negotiation, the emphasis on alternatives became especially evident. Neumann also underscored the value of patient input and real-world evidence (RWE), noting that CMS’s rationale documents contain hundreds of references, with many of them linked to real-world data (RWD), hospitalization rates, and cost information. While the precise role this evidence played remains unclear, it is evident that CMS is actively reviewing these data sources.

Manufacturer strategies: evidence planning amid uncertainty

Echoing Neumann, Russ Montgomery also noted the extensive list of references for each product as one of the most revealing aspects of the CMS rationale documents. The inclusion of HEOR and research best practices suggests CMS is considering not just evidence quantity, but quality.

Despite the ambiguity and uncertainty about how the evidence is reviewed by CMS, he emphasized the opportunity it presents for manufacturers to shape their submissions and communications strategically.

“They're not putting a lot of restrictions on certain types of evidence and saying you can only submit this or that. From a manufacturer's perspective, it gives you the opportunity to respond to the evidence you think is the most compelling…it gives you an opportunity to present the package in the way that you want to.”

Montgomery recognized that there isn’t a one-size-fits-all formula, or “secret sauce”, for navigating IRA price negotiations, noting that each case varies based on the drug’s characteristics, therapeutic class, and level of differentiation. He added that for long-standing monopoly drugs facing the mandatory 60% discount, the price of therapeutic alternatives may already exceed the ceiling price. In such cases, the ability for value-based evidence to influence the outcome is limited, as there’s often little room for negotiation beyond the statutory discount, regardless of the strength of the submitted evidence.

Montgomery also advised manufacturers to start planning early, ideally 2–3 years in advance, and to align IRA-focused evidence generation with broader market access strategies. He recommended building from the product’s core value proposition: identifying key value drivers, gathering relevant comparative data, and packaging it effectively within the ICR. Given the broad and sometimes overlapping questions in the ICR format, manufacturers should use it to tell a cohesive story, walking CMS through clinical guidelines, therapeutic alternatives, and data. He stressed the importance of tailoring submissions to an audience that may not be deeply familiar with the therapeutic area, noting, “you have to assume that they're not necessarily coming into this negotiation as experts in your disease area.” Reiterating key messages throughout the submission is essential to ensure they stand out amid the large volume of information CMS must review.

In addition to the ICR itself, Montgomery highlighted the importance of the initial 60-minute manufacturer meeting with CMS before the initial pricing offer is made. He encouraged manufacturers to use this time to distill their value proposition and highlight the most critical data points, drawing on insights from medical affairs and access teams to frame their message effectively.

How MFPs are reshaping the drug marketplace

Michael Ciarametaro framed the discussion around the question, “Now we have the MFPs—what exactly does that mean?” He addressed the implications in two parts: coverage and access. From a formulary standpoint, he noted that Year 1 is relatively unique. Many of the negotiated products either have strong clinical profiles that dominate their class or are dominated by cheaper biosimilars or private-label options. Because of this, he expects limited changes in formulary coverage for Year 1. However, looking ahead to future negotiation cycles, such as IPAY 2027, he anticipates more significant shifts as more competitors enter, and therapeutic classes become more dynamic.

The second, and more overlooked, challenge he raised is the effectuation of MFPs at the point of dispensing. In most cases, pharmacies or provider offices will have to initially cover the cost difference between the wholesale acquisition cost (WAC) and the MFP, with reimbursement from manufacturers coming retrospectively. This creates a substantial cash flow burden, especially for smaller, independent pharmacies who may need to absorb this cost for 14 days or longer. Ciarametaro warned that this “sleeping giant” could push some pharmacies out of the Medicare market if left unaddressed, as financial strain increases with each newly negotiated drug.

Assessing which evidence makes the greatest impact in MFP decisions

Before the IRA negotiation process began, one key question was whether CMS would consider evidence beyond traditional randomized controlled trials (RCTs). According to Michael Ciarametaro the answer appears to be yes, particularly in therapeutic areas like anticoagulation and heart failure/diabetes where RWE showing reduced hospitalizations helped support stronger value propositions and likely resulted in more favorable MFPs. However, in other drug classes where economic impact is less direct or falls more heavily on the patient, RWE seemed to carry less weight. Ultimately, he noted, CMS is focused on savings and making quantifiable economic outcomes especially influential.

Russ Montgomery explained that the influence of value-based evidence in IRA negotiations depends heavily on the pricing dynamics within each drug class. Reiterating that the process is not formulaic, he emphasized the importance of aligning evidence strategies with broad statutory factors such as comparative effectiveness, unmet need, and therapeutic advance. RWE can be particularly impactful, especially when studies are methodologically sound and demonstrate clear links between patient outcomes, hospitalizations, and Medicare cost savings. He also noted CMS’s growing emphasis on patient input, citing more productive patient listening sessions in IPAY 2027 as a sign of shifting priorities. Despite the inherent risks of conducting post-launch head-to-head studies, especially in competitive markets, Montgomery encouraged manufacturers to treat them as a strategic opportunity to generate persuasive, high-value evidence.

“Comparative data is obviously what CMS wants to see. And being more willing to take some of those risks is something that, from a manufacturer perspective, we need to think about.”

Neumann also emphasized that CMS reviewers are unlikely to be persuaded by RWE claims, such as “we reduce hospitalizations,” without strong methodological support. “It’s not enough to just assert we reduce hospitalizations…CMS needs to know why that’s credible,” he said. He urged manufacturers to demonstrate the reliability of their RWE by adhering to best practices: appropriate comparators, pre-specifying endpoints, including large and Medicare-relevant populations, and ensuring statistical robustness. He noted that while many submissions referenced RWE, few clearly explained why the findings should be considered credible by CMS.

Importance around selecting therapeutic alternatives

Both Peter Neumann and Russ Montgomery expanded on the critical role of therapeutic alternatives in CMS’s decisions, emphasizing both the uncertainty of CMS’s internal process and the opportunities manufacturers have to influence it. While in some cases, the appropriate comparator is clear, supported by clinical guidelines or consensus, many therapeutic areas are more ambiguous, with multiple potential comparators. In such cases, manufacturers can play a key role in guiding CMS by highlighting clinical guidelines, real-world utilization data, and feedback from practicing clinicians to make a strong, evidence-based case for the most appropriate alternatives.

For Montgomery, the ICR explicitly provides manufacturers with the opportunity to make this case, making it a vital opportunity to shape CMS’s perspective. He advised manufacturers to work closely with clinical and medical affairs teams to understand how decisions are made in practice, and to draw on this insight to build a persuasive narrative. However, he also cautioned that CMS may still choose comparators not emphasized in the submission, so it is important to anticipate various scenarios and include evidence addressing other potential alternatives.

Neumann reinforced the central role of therapeutic alternatives in MFP decisions, particularly in cases like the anticoagulants apixaban and rivaroxaban, where RWD and cost evidence, including hospitalizations, likely influenced price differences in the absence of head-to-head trials. He noted that comparators like warfarin were likely excluded due to clinical limitations and patient feedback. Neumann stressed the importance of educating CMS, whose reviewers may not be steeped in product-specific data. He advised manufacturers to focus on the evidence and get straight to the point in their evidence dossiers, particularly compared to comparators: “The priority here…is our drug’s price should not be lower than the ceiling price. And here’s why.”

Balancing evidence generation with resource constraints in IRA planning

During the discussion, Taylor Schwartz raised the question of how manufacturers should think about the resources required for the negotiation process. He noted that while more evidence can always be generated, evidence gaps alone do not necessarily determine what will influence CMS decisions. “How do you weigh that and sift through it?” he asked. Addressing this, Russ Montgomery explained that resource investment in evidence generation should be based on the specific context of each product. For some therapies, particularly those in classes where therapeutic alternatives are priced above the ceiling, there may be little opportunity for additional evidence to influence pricing outcomes. In such cases, significant investment may not be justified. He advised manufacturers to integrate IRA considerations into their broader evidence planning process, weighing them alongside other US and global payer needs. The key, he said, is conducting a gap analysis: identifying whether critical evidence is missing, especially comparative data against likely alternatives, and then determining whether closing those gaps would be worth the investment.

This was echoed in the audience Q&A, where Montgomery noted that generating comparative evidence remains a high-risk, high-investment decision for manufacturers. While there is a well-informed belief that CMS values head-to-head studies, this remains somewhat theoretical until more pricing rationales and guidance emerge. He advised manufacturers to, “take a step back and think about your overall evidence package to tell a compelling value story to CMS.” Michael Ciarametaro added that these decisions should not be made solely for negotiation but embedded early in a product’s development strategy, as the value of robust comparative data extends well beyond IRA submission to broader coverage and access.

Cost-effectiveness: working within the constraints

While the IRA explicitly prohibits the use of QALYs (quality-adjusted life years), Peter Neumann clarified that manufacturers can still present a compelling value story using broader cost-effectiveness principles. He emphasized that submissions should justify why a product’s price should be close to the ceiling by comparing it to therapeutic alternatives and highlighting supporting evidence. This value narrative can include data on cost offsets, downstream savings, and productivity gains, often supported by RWD. Neumann noted that CMS has acknowledged the importance of value, and there is ample room for manufacturers to frame arguments around economic and clinical benefits without relying on QALYs.

This point was further explored during the audience Q&A, where a question was raised about whether a single summary metric like the QALY would be beneficial. Neumann reiterated that QALYs are prohibited under the IRA and suggested that this is unlikely to change, given long-standing opposition from the community, industry, and parts of the medical profession. While alternative metrics such as equal value life years gained (evLYG) have been used in ICER reports, these alternatives have not gained broad support. Despite the appeal of such summary statistics, Neumann argued that the US remains committed to a more flexible, albeit less standardized, approach to assessing value.

For Michael Ciarametaro, the broader acceptance of QALYs in the US depends heavily on social and political context. He pointed out that countries like the UK and Canada have embraced QALYs, while others like Germany have not. In the US, foundational questions about how healthcare decisions are made and who gets access to services must first be addressed before metrics like QALYs can be more widely accepted.

About the speakers

Taylor Schwartz
Managing Director, Avalere Health

Taylor Schwartz is a Managing Director who works collaboratively with clients to develop, design, and execute epidemiological and health economic and outcomes research studies in a variety of therapeutic areas, in addition to health policy analyses and medical innovation value assessment studies.

Michael Ciarametaro
Managing Director, Avalere Health

Michael Ciarametaro is a Managing Director and provides strategic advice to life sciences manufacturers on developing value and evidence strategy and navigating drug pricing, payment reform, and the Inflation Reduction Act (IRA). Ciarametaro has also guided clients in creating value strategies relevant to the Institute for Clinical and Economic Review’s product evaluations.

Peter J Neumann, ScD
Director, Center for the Evaluation of Value and Risk in Health, Institute for Clinical Research and Health Policy Studies, Tufts Medical Center; and Professor, Tufts University School of Medicine

Peter J Neumann, ScD, is Director of the Center for the Evaluation of Value and Risk in Health (CEVR) at the Institute for Clinical Research and Health Policy Studies at Tufts Medical Center, and Professor of Medicine at Tufts University School of Medicine. He is the Founder and Director of the Cost-Effectiveness Registry, a comprehensive database of cost-effectiveness analyses in health care. Dr Neumann has written widely on the role of clinical and economic evidence in pharmaceutical decision making and on regulatory and reimbursement issues in health care. He served as Co-Chair of the 2nd Panel on Cost-Effectiveness in Health and Medicine. He is the author or co-author of over 300 papers in the medical literature, and the author or co-author of 3 books: Using Cost-Effectiveness Analysis to Improve Health Care (Oxford University Press, 2005); Cost-Effectiveness in Health and Medicine, 2nd Edition (Oxford University Press, 2017); and The Right Price: A Value-Based Prescription for Drug Costs (Oxford University Press, 2021). Dr Neumann has served as President of the International Society for Pharmacoeconomics and Outcomes Research (ISPOR). He is a member of the editorial advisory board of Health Affairs and the panel of health advisors at the Congressional Budget Office. He has also held several policy positions in Washington, including Special Assistant to the Administrator at the Health Care Financing Administration. He received his doctorate in health policy and management from Harvard University.

Russ Montgomery
Head of Value Assessment Strategy and Policy, GSK

Russ Montgomery, PhD, is Head of Value Assessment Strategy and Policy at GSK.  He has more than 10 years of experience in the life sciences and consulting sectors in value, access, and policy roles with both a US and global focus. He previously held health policy roles in the US federal and state governments. Russ holds a PhD in Health Services Research and Policy from Johns Hopkins University, where he spent time on the faculty.

Disclaimer

Russ Montogemery discloses that the views expressed were his own and do not reflect those of GSK or any company preparations related to the IRA. All other opinions expressed in this feature are those of the speakers and do not necessarily reflect the views of The Evidence Base® or Becaris Publishing Ltd.

Sponsorship for this Deep Dive was provided by  Avalere Health.