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Analyzing Drug Manufacturers' January 2023 Price Adjustments: Assessing the Influence of IRA, Inflation, or Both

28 Feb 2023

In this 3rd installment of an ongoing blog series on the key provisions of the Inflation Reduction Act of 2022 (IRA), we have added the January 2023 price changes to our assessment. This additional data shows more drug manufacturers accelerating price increases, seeming to factor in the IRA and the possibility of future pricing penalties as well as the period of post-pandemic higher inflation. Part 1 of the series was an overview of the IRA’s key provisions and can be found here. Part 2 assessed price increase levels pre/post 2020 election through the end of 2022 and can be found here.

Here we examine the key aspects of the IRA’s inflation penalty rebate component as well as its effect on the top 50 Medicare Part D drugs by comparing past price changes and shifts in price change behaviors over time. Specifically, we examined what products might incur an inflation penalty based on their price change history and detailed their past price actions. We gauge the impact of the pending reforms and hope to glean any change in price increase behaviors.

Clarification on IRA Permission and Limitations:

The January 2023 data shows a significant increase in the products with accelerating price increases. This is likely the result of both the increased general inflation rate and the “permission” for increases to a defined level granted by the IRA. While 36% of the products accelerated their increase, more than at any other time period measured in the analysis, only 18% of the products exceeded the CPI-U increase cap imposed by the IRA.


Our analysis looked at the price increases (year-on-year) of the top 50 Medicare Part D drugs (contributing ~50% of the total Medicare spending in 2020) starting from January 2019 to January 2023. We examined how each of the top 50 products changed their WAC (Wholesale Acquisition Cost) prices during this time period (i.e., how many products’ price increases decelerated vs. maintained a flat trajectory vs. accelerated) compared to the prior year.

Since Average Manufacturers Price is confidential, we used WAC as a surrogate price. The analysis begins with a calculation of the Benchmark Price based on the WAC in effect during the period between January 1, 2021, and September 30, 2021. This Benchmark Price is compared to the First Assessment period price defined by the IRA including the 2023 price increases to determine if a product was likely to incur an inflation penalty.

The following time periods were considered:

Time Periods
(Price increase as on…)
(Jan-2020 vs. Jan-2019)
Price change in Jan-2020 vs. price change in Jan-2019
(Jan-2021 vs. Jan-2020)
Price change in Jan-2021 vs. price change in Jan-2020
(Jan-2022 vs. Jan 2021)
Price change in Jan-2022 vs. price change in Jan-2021
(Jan-2023 vs. Jan-2022)
Price change in Jan -2023 vs. price change in Jan-2022

Table 1 below shows each trend category of price increases (decelerated vs. remained flat vs. accelerated) across the time periods. The two rows for each trend show the percentage of products and their contribution to Medicare top 50 sales within each group of products.

Table 1: Comparing the price increase trend of the top 50 Medicare products from January 2019 to January 2023

Post-electionPeriod of
high inflation
TrendParameter(‘20 vs. ‘19)(‘21 vs. ‘20)(‘22 vs. ‘21)(’23 vs. ‘22)
Flat% of products28%64%58%44%
% of 2020 sales35%67%62%52%
Deceleration % of products52%22%26%20%
% of 2020 sales50%24%20%21%
Acceleration % of products20%14%16%36%
% of 2020 sales15%9%18%27%

During the latest period, the acceleration trend significantly increased compared to prior years. This is the case even though the flat trend is still the largest in terms of the number of products (44%) and percentage of sales (52%). The rate of price increase acceleration from January 2022 to January 2023 shows 36% of products accelerated their price changes, more than double the prior period. This is the highest percentage of accelerated price increases in our 5-year measurement period and shows more products consciously raising prices faster in 2023. There are two factors to consider that drive this trend: while a higher inflation rate gives manufacturers a higher increase opportunity, the IRA potentially penalizes future increases; however, the rules dictated by the IRA seemingly give “permission” to take increases up to the calculated limit, as explained below.

The factual components of the IRA and its inflation penalty calculation were known before manufacturers took their 2023 price changes. From the IRA perspective, the key factors are the:

Benchmark Period price (Jan 1, 2021, through Sept 30, 2021);
Benchmark CPI-U (Jan 2021 – 261.582); and
First Applicable Period CPI-U (Oct 2022 – 298.012).

Using these factors we calculate that any cumulative increase >13.92% would trigger an inflation penalty. Table 2 below summarizes the cumulative increases of the top 50 Medicare Part D products from the benchmark period to their 2023 WACs to determine how nine products seemed to have crossed this threshold.

Table 2: Comparing the cumulative price increases from the benchmark period to the first assessment period taking the 2023 price increases of the top 50 Medicare Part D products into consideration.

Cumulative price increase %
from benchmark
# of
% of
% of
Top 50 Sales
10.0% - 13.92%1632%41%
5.1% - 9.9% 1428%22%
Total 50100%100%

Table 2 clearly implies the limit set by the IRA methodology influenced price increases since 32% of the products totaling 41% of the sales took cumulative double-digit increases but stayed below the statutory limit.

Further, Table 3 below shows the nine products expected to exceed the IRA’s 13.92% inflation threshold. We compared these products’ annual price increase behaviors to determine if, and how, they modified their pricing actions.

Table 3: Comparing the annual January price increases of the products that are likely to incur an inflationary price penalty.

(21 vs. 20)
(22 vs. 21)
(23 vs. 22)
from the
Humira (Cf) PenAbbvie7%7%8%16.0%
Humira Pen Abbvie7%7%8%16.0%
Enbrel SureclickAmgen7%7%10%18.7%
Invega SustennaJanssen5%5%8%14.2%
Ibrance Pfizer5%7%8%15.3%

The nine products cumulatively had 2020 Part D sales of $14.5 billion, 16% of the Top 50 Part D product sales. Out of the nine products likely to incur an inflation penalty, there is a mix of pricing actions taken:

Six products (Humira Cf Pen, Humira Pen, Enbrel Sureclick, Invega Sustenna, Opsumit, and Ibrance) accelerated their product price increase in 2023 compared to 2022.
Two products (Imbruvica and Jakafi) decelerated their price increases but still exceeded the threshold.
One product (Entresto) remained flat but also still exceeded the threshold.

Implications of Humira Losing Exclusivity:

Humira losing exclusivity in 2023 could have played a role in their acceleration as, before 2023, price increases in the previous year remained flat. Janssen has two products (Invega Sustenna and Opsumit) where both accelerated price increases.

This analysis shows that in January 2023, more drug manufacturers accelerated their price increases. Alongside the period of higher inflation, the price increases seem to clearly factor in the IRA and the possibility of future pricing penalties. The longer-term trend will be interesting to monitor. Please continue to follow our upcoming blog posts as we continue our assessment of the impact of the IRA.




Jack M Mycka
Jack M Mycka
Srinath Selladurai
Srinath Selladurai

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