How the Inflation Reduction Act Impacts Medicare Drug Prices

President Joe Biden signed the Inflation Reduction Act (IRA) into law on Aug. 16, approving a sweeping legislative package aimed at combating climate change, raising taxes on large corporations and lowering health care costs.

It’s big news for Medicare, which covers over 62 million Americans — mostly seniors 65 and older.

The new law will allow Medicare to directly negotiate prices for some of the program’s costliest drugs, cap insulin copays to $35, limit out-of-pocket beneficiary drug costs to $2,000 a year and ban drug companies from raising prices faster than inflation.

Health care experts consider it the biggest overhaul of Medicare in at least 20 years.

“Members of Congress, mostly Democrats, have been trying to give the authority to negotiate Medicare drug prices since the Clinton years, so this is really an enormous breakthrough,” said Tricia Neuman, a Medicare policy expert and senior vice president of the nonprofit Kaiser Family Foundation.

However, the new changes don’t roll out all at once, and there are some limitations in the law.

Here’s how the Medicare portions of the Inflation Reduction Act could impact your prescription drug costs.

At a Glance: Medicare Changes in the Inflation Reduction Act

There are five major Medicare-related provisions in the Inflation Reduction Act.

The new law:

1. Creates a $2,000 cap on annual out-of-pocket Medicare drug costs for beneficiaries.
2. Gives the government the power to negotiate Medicare drug prices with pharmaceutical companies.
3. Limits premium growth in Part D to no more than 6% per year from 2024-2029. Part B premiums have increased 6% or more four times in the past decadeincluding last year, when Part B premiums jumped 14.5%.
4. Penalizes drug companies for raising prices faster than inflation. If a drug’s price outpaces inflation, the company must pay the government the difference between the price charged and the inflation rate for all Medicare sales of that drug.
5. Caps…